Investors in U.S.-based funds pulled $6.51 billion out of stock mutual funds in the week ended Wednesday, marking the biggest weekly outflows this year, on worries the U.S. Federal Reserve could scale back its bond purchases as soon as next week, data from Thomson Reuters' Lipper service showed on Thursday.
The outflows from stock mutual funds in the week ended December 11 marked the biggest withdrawals from the funds since August 2011. Mutual funds are often purchased by retail investors.
"There was some reason for caution," said Jeff Tjornehoj, head of Americas research at Lipper. "No one wants to be left at the top of the market."
The Fed's $85 billion in monthly purchases of Treasuries and agency mortgages have helped boost the Standard & Poor's 500 stock index 24.5 percent this year. The bond-buying program has kept interest rates low, leading investors to seek higher income in riskier assets such as stocks.
The index fell 0.6 percent over Lipper's weekly reporting period, however, after robust U.S. economic data and a budget deal in Washington stoked fears that the Fed will begin reducing the pace of its purchases during its next meeting on December 17-18.
The big outflows from stock mutual funds were even more noticeable since investors have poured cash into the funds almost every week this year. The outflows marked just the third full week of withdrawals from stock mutual funds in 2013.
The dip in the U.S. stock market over the weekly period ahead of the Fed meeting was "the impetus for some retail investors to act before things got worse," said Tjornehoj.
The size of the latest outflows from stock mutual funds also trounced the other two weeks of withdrawals this year, which occurred consecutively in early October and together amounted to just $435 million. Until the latest week, fears of a pullback in Fed stimulus have largely spurred outflows exclusively from stock exchange-traded funds.
While investors pulled cash out of stock mutual funds, stock ETFs attracted $4.7 billion in new cash, marking a big increase from inflows of about $594 million the prior week.
The SPDR S&P 500 ETF was the most popular ETF and attracted $3.2 billion in new cash. ETFs are generally believed to represent the investment behavior of institutional investors.