Investors Put Record $17.2 Billion Into Stock Funds Thursday, TrimTabs Says

Mutual fund investors showed their jitters last week, setting single-day records for both inflows and outflows, according to estimates from liquidity tracker TrimTabs.com.

In an interview with TheStreet.com last week TrimTabs.com President Charles Biderman said, by his firm's calculations, investors yanked some $13.1 billion out of U.S. and global stock funds on Jan. 3, the first trading day of 2001. He attributed the move to a "crisis in confidence" among investors. Between the Nasdaq Composite Index's March 10 peak and the end of last year, the average technology fund and large-cap growth fund lost more than 50% and 20%, respectively, according to Morningstar.

The next day the Federal Open Market Committee surprised investors by slashing its key fed funds rate by 50 basis points -- from 6.5% to 6%. Rate cuts stimulate economic growth and are typically a good sign for the stock market. Apparently buoyed by the news, investors stuffed a record $17.2 billion into the stock funds on Thursday, according to a Monday morning report from TrimTabs.com.

The net inflows to stock funds were $5.3 billion for the week, according to the report, a bit higher than last year's average.

Market watchers keep a close eye on stock fund flows because they can be a barometer of investor sentiment. Many also believe that rising flows to stock funds presage a positive run for the stock market, since those billions can push stock prices north when invested in the market. In recent weeks, market watchers have pointed to rising cash stakes in stock funds as a bullish indicator, thinking that the rate cut or some other positive catalyst could lead trigger a stock buying spree by portfolio managers.

Recent history both helps and hurts this argument. When the rate cut was announced on Wednesday, the battered and tech-laden Nasdaq rang up a 14.2% gain, its largest one-day gain ever on a percentage basis. On the other hand, last year's stock fund flows were 47% higher than 1999's, according to TrimTabs.com, and yet stocks slumped last year.

For more on mutual fund flow data, check out TSC's Metrics page.