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Investors still favoring bonds over stocks

September 13, 2012: 1:54 PM ET

The retreat from U.S. stocks continued last week, with investors pulling $2.9 billion of domestic stock mutual funds.

The summer may be over, but investors continued to pull money from the stock market in the latest week, as they waited on central banks to take steps to stimulate the global economy.

During the week ended Sept. 5, U.S. stock mutual funds bled another $2.9 billion, according to the Investment Company Institute, bringing the 2012 outflow total to more than $79 billion.  By comparison, those funds lost in the neighborhood of $70 billion during the first eight months of 2011, and just $52 billion during the first eight months of 2010.

The outflows from stocks could ease in the coming weeks, however, as the European Central Bank and Federal Reserve have recently unveiled new stimulus program.

Last Thursday, ECB president Mario Draghi said the central bank is prepared to make "outright monetary transactions," or OMTs, in the secondary bond market.

The Fed followed up this week, launching a third round of bond purchases, or QE3. Specifically, the Fed plans to buy $40 billion of mortgage-backed securities each month. And the end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months.

Meanwhile, bond funds continued to remain in favor, drawing in $5.3 billion in the latest week, but that was the least amount of new money in five weeks.  Over the course of the year, bond mutual fund have raked in nearly $212 billion.

And hybrid funds, which invest in both stocks and bonds, also continued to attract investors. Hybird funds brought in $910 million last week.
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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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