U.S. equity fund inflows plunged in the week ended March 10, with $700 million in new money moving into funds compared with $4.5 billion in the prior week, according to research data from Trim Tabs.

International stock funds took in $400 million, about half the amount of the previous week.

The sharp slowdown in equity inflows coincides with a selloff in stocks this week leading to the Dow's long-awaited 5% correction, which was achieved on Thursday. All the major indices are down sharply this week and have hit new lows for the year.

Fixed-income funds took in $100 million, down from last week's $200 million, despite the Treasury market's enormous rally, which drove the yield on the benchmark 10-year note to the lowest level since last July. The rally started last Friday after the government announced that nonfarm payrolls grew by just 21,000 in February, leading many to conclude that the Fed would now raise interest rates later than sooner.

Miller Tabak strategist Tony Crescenzi says the decline in liquidity signals a temporary consolidation after an extended run-up.

"Risk attitudes have changed, so people are taking profits," says Crescenzi.

Crescenzi also points to the busy high-yield calendar as a "red flag to investors" that the bond market needs some time to digest. He says that the increase in low-grade issuers coming to market and abundant credit card offerings may cause some skepticism in the marketplace.

Trim Tabs CEO Charles Biderman said there had been a rush into high yield bonds, saying that $700 million came into the group during the period from March 3 to March 10.

"It appears that investors have been taking money out of government bonds and Ginny Maes due to their low yields and replacing them with higher yielding bond funds," says Biderman.

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