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Investors 'wait and flee': $10 billion yanked from stocks

October 11, 2012: 1:35 PM ET

Investors pulled nearly $10.6 billion from U.S. stock mutual funds last week. That brings the total 2012 outflow to more than $100 billion.

Investors have been bailing out of the stock market all year, but the exodus picked up considerable speed last week.

U.S. stock mutual funds bled nearly $10.6 billion during the week ended Oct. 3, the most since the week in August 2011 when Standard and Poor's downgraded the U.S. credit rating following the debt ceiling brawl in Washington, according to data from the Investment Company Institute.

That brings the total 2012 outflow from U.S. mutual funds to more than $100 billion. By comparison, those funds lost around $57 billion during the first nine months of 2010, and $80 billion during the first nine months of 2011.

Related: Individual investors miss the rally ... again

As investors were pulling money out, the S&P 500 still managed to rise a modest 1.2%.  The tepid gains came amid mounting evidence of a growth slowdown in China and questions about whether Spain will request a bailout.

"Investors have recently adopted a "wait-and-flee" attitude toward equities" as they seek more clarity on issues in Spain and brace for third-quarter corporate earnings, the November elections and resolution to the U.S. fiscal cliff, said Sam Stovall, chief equity strategist at S&P Capital IQ.

While retreating from the stock market, investors continued to embrace the safety of bonds, which showed the highest demand in almost three years. Bond funds raked in $10.9 billion during last week, up from an average of about $6 billion a week this year, and the most since the week ended Oct. 21, 2009.  So far this year, bond funds have attracted over $270 billion.

Meanwhile, the ICI data showed that hybrid funds, which invest in both stocks and bonds, also saw an increase of $2.2 billion.

Related: Individual investors have insatiable appetite for ETFs

While investors are no doubt pulling out of U.S. stock mutual funds, it's important to note that they are shifting some of their money into exchange-traded funds, said Dan Greenhaus, chief global strategist at BTIG.

In fact, year-to-date, ETFs have brought in more than $135 billion, and while the flows aren't enough to fully offset the nearly $470 billion that has been pulled from mutual funds since 2008, ETF assets stand at a record high of $1.3 trillion, and demand continues to grow.

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Hibah Yousuf
Hibah Yousuf
Reporter, CNNMoney

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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