US equity funds attracted net inflows of $1.03 billion for the week ending July 1, reversing part of the prior week’s $3.47 billion in withdrawals. The return to buying was led by technology sector funds, which drew $3.42 billion after investors had pulled nearly $20 billion from the group the week before. The shift came as softer-than-expected June jobs data lowered expectations for a near-term Federal Reserve rate hike.
According to fund flow data, large-cap funds absorbed $7.2 billion in net new money, while financial funds added $1.96 billion and healthcare funds received $1.47 billion. However, the recovery was not broad-based. Small-cap funds saw $694 million in outflows, mid-cap funds lost $2.1 billion, and equity income funds recorded withdrawals of $1.33 billion. This suggests that investor confidence remains concentrated in larger, more liquid names and selected sectors.
The labor report played a key role in the sentiment shift. The US economy added only 57,000 new jobs in June, below market expectations, and previous months’ payroll figures were revised downward. The data reduced the likelihood that the Federal Reserve would raise interest rates before year-end, encouraging a move back into equities, particularly technology stocks that had been sold off sharply.
Bond and money market funds also saw strong demand. US bond funds attracted a net $9.88 billion, extending their inflow streak to 11 consecutive weeks. Short-to-intermediate investment-grade bonds took in $4.22 billion, while general domestic taxable fixed-income funds added $3.53 billion. In contrast, short-to-intermediate government and Treasury funds experienced $2.1 billion in outflows. Money market funds recorded the largest weekly allocation in four weeks at $47.82 billion, reflecting cautious positioning ahead of the payroll data and ongoing inflation uncertainty.
The cautious mood was also influenced by supply chain disruptions linked to the closure of the Strait of Hormuz, which have forced vessel rerouting and raised concerns about transport costs adding to future inflation. James Rossiter of TD Securities identified shipping as a major risk for the year.
Global equity markets rose on Friday following the weak US jobs data. The MSCI world index gained 0.4% and was on track for a weekly rise of about 2%, its best performance in two months. Europe’s STOXX 600 rose 0.6% to a record high, heading for a 2.6% weekly gain. David Morrison of Trade Nation noted that European shares have benefited from lower valuations and less exposure to the artificial intelligence trade, questioning whether highly valued US tech stocks can continue to lead global gains.
Asian markets also advanced, with chip stocks rebounding. South Korea’s KOSPI surged roughly 6%, while Japan’s Nikkei rose 1.5%. Purchasing managers’ data showed expansion across major Asian economies. Gold climbed 1% to above $4,160 an ounce, heading for a 1.8% weekly gain. The dollar paused after hitting its highest level in over a year. Brent crude edged up 0.45% to $71.12 a barrel. US markets were closed Friday for the Independence Day holiday.
Looking ahead, investors are expected to focus on upcoming inflation and economic data for clues about the Fed’s next policy move. Technology stocks may continue to lead gains if economic conditions remain supportive, but the narrow nature of the current equity recovery suggests caution may persist.