NEW YORK: With the S&P 500 near a five-year high and data showing whopping inflows into stock funds at the beginning of the year, the cult of equity might not be quite dead yet, after all.
In a relatively quiet trading day, Wall Street was abuzz on Friday, discussing the latest fund flow data from Lipper.
Equity funds, including exchange-traded funds, took in $18.3 billion for the week ended Jan. 9, the fourth-largest net inflows since Lipper began calculating weekly flows in January 1992. Some $10.8 billion poured into equity ETFs, while mutual funds took in more than $7.5 billion, their largest inflow since the week ended May 2, 2001.
The data are not entirely surprising, given that the stock market rallied after Congress managed to cobble together a last-minute budget deal to avert a budget situation that came to be known as “the fiscal cliff.” But the trend was enough to get observers wondering if investors were finally ready to stop sulking over the last bear market and get back into equities.
On Friday, investors largely retreated to the sidelines. The S&P 500 closed virtually unchanged at 1,472.05 compared to 1,472.12 in the previous session, which marked a five-year closing high. The benchmark rose 0.4 percent for the week and is up 3.2 percent so far this year.
The Dow Jones was up 17 points and closed at 13,488.43.
“We have just come off a nice first couple of weeks of the year where we rallied pretty significantly,” said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago. “I suspect there is some profit-taking today.”
A recent rise in bullish sentiment, warned Bank of America Merrill Lynch strategists this week, could trigger a market meltdown by June.
Investors were also preoccupied with earnings on Friday. Wells Fargo & Co., the first major U.S. bank to release results, reported fourth-quarter earnings and revenue that topped analyst expectations. But the bank’s net interest margin declined to 3.56 percent compared to 3.89 percent a year ago and from 3.66 percent in the third quarter.
Shares of Wells Fargo fell 0.9 percent. Other major banks also declined, with Bank of America Corp. down 1.3 percent and Citigroup Inc. down 1.1 percent.
Also in the financial sector, shares of American Express Co. gained 0.7 percent after the firm late Thursday outlined plans to eliminate 5,400 jobs. It was one of the gainers in the Dow Jones industrial average, which rose 17.21 points, or 0.1 percent, to end at 13,488.43. The Dow gained 0.4 percent for the week.
Chevron Corp. gained 1.1 percent after the oil company said it expects its fourth-quarter profit to rise due to higher production.
The earnings season will kick into high gear next week with a number of blue-chip companies expected to report results including industrial conglomerate General Electric Co., chip maker Intel Corp., managed-care provider UnitedHealth Group Inc. and banking group JPMorgan Chase & Co.
“Companies are in a little bit of a difficult situation, because the [earnings] expectations have been lowered fairly significantly,” said TD Ameritrade’s Kinahan. “They are at a pressure point where they have to beat. But everyone is more focused on the conference calls. The market is looking for CEOs to say that the picture has brightened.”
Economic data showed the trade deficit widened nearly 16 percent in November. The economic calendar next week will include housing starts, retail sales and consumer prices.