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U.S. stock mutual funds bleed as investors cash out

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Mutual fund investors are bailing out of stocks at a brisk pace again, which could be adding more downward pressure on a weak market.

Net cash outflows from U.S. stock funds totaled $6.53 billion in the seven days ended July 20, the Investment Company Institute reported Wednesday.

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That was up 60% from $4.09 billion the previous week and the largest one-week outflow of money since $6.87 billion exited the week ended June 15.

Mutual fund cash flow totals are new purchases minus redemptions by investors selling out.

The outflows still are relatively small compared with the $4.2 trillion in total assets in domestic stock funds. But redemptions can be trouble for fund portfolio managers by forcing them to sell shares to pay departing investors, or by limiting their ability to buy stocks they believe are bargains.

What’s more, the funds have been losing assets nonstop since the last week of April -- which, coincidentally, was when major U.S. stock market indexes hit their 2011 highs.

The Dow Jones industrial average crested at 12,810.54 on April 29. It’s down 4% since then, including Wednesday’s 198-point, 1.6% decline to 12,302.55.

Over the last 13 weeks a net $45.1 billion has exited domestic stock funds, or more than 1% of assets.

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It’s back to the future for many fund managers, who also had to contend with outflows for much of 2009 and 2010 as more investors fled the equity market after the 2008 crash.

And just as in 2009 and 2010, many Americans are more inclined to invest in foreign stocks if they’re buying stocks at all: Foreign-stock mutual funds had a modest net outflow of $311 million in the week ended July 20, but that followed four straight weeks of inflows -- even as domestic funds continued to bleed.

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-- Tom Petruno

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