Money flowed out of mutual funds last week, erasing a spike in deposits from the week before, as market volatility continued to undermine investors’ confidence.
TrimTabs Investment Research said Thursday that about $12.1 billion was withdrawn from stock-based mutual funds in the week ended Dec. 3. The week before, investors had put $10.4 billion into these funds.
The bulk of the exodus happened on Monday, with modest inflows occurring on the remaining days, according to Vincent Deluard, a TrimTrabs analyst. Investors pulled out $16 billion on Monday as the Dow Jones Industrial Average dropped 680 points or 7.7%.
On Monday, The National Bureau of Economic Research made official what most Americans already believed about the state of the economy - that the U.S. has been in a recession since December 2007.
"Mutual fund money is performance following," Deluard said. Investors tend to pump money into mutual funds when the market advances, "when the market goes down they take their money out," he said.
To that end, the $10.4 billion inflow that occurred during the previous week corresponded with a rare 5-day rally on Wall Street. It was only the second time in 17 weeks that money had flowed into mutual funds.
In addition to the drainage of stock-based mutual funds, bond funds had an outflow of $6 payday loan online.8 billion, versus an inflow of $7.4 billion the week before.
The flight from bond funds was the "most striking feature" of this week’s report, Deluard said.
"People normally sell equities in a bear market and buy bonds because they are supposed to be safe and that was the case up until September," he said.
But now investors are cashing out of both stock and bond funds, reflecting the market’s "extreme risk aversion," Deluard said.
Mutual funds that invest primarily in U.S. stocks posted an outflow of $8.3 billion, after gaining $6.8 billion the week before. Funds that invest in overseas stocks shed $3.8 billion compared with $3.6 billion that came in during the previous week.
Exchange-traded funds, or ETFs, that invest in U.S. stocks posted an inflow of $920 million, compared with an inflow of $4.3 billion the previous week. ETFs of non-U.S. stocks had an inflow $643 million, compared with inflow of $1.5 billion in the previous week.
The United Auto Workers agreed to work with the embattled U.S. automakers about changes in their labor contract, an important step for the industry’s chance to win up to $34 billion in federal loans.
The announcement was made Wednesday by UAW President Ron Gettelfinger at a news conference after meeting with union officials from plants operated by General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC.
GM has warned it will run out of the money it needs to operate later this month unless it gets assistance from the government. GM said it needs $4 billion before the end of the year. Chrysler said it will run out of cash in the first quarter of next year without help.
The companies all presented plans to Congress Tuesday for how they would use federal loans to return to profitability. The Big Three CEOs and Gettelfinger are due to appear at Senate and House hearings Thursday and Friday seeking support for the loan package.
Gettelfinger said the union will suspend the "jobs bank" at GM. That is a jobs guarantee program that pays laid off auto workers up to 95% of their regular pay online cash advance. He said the union is also open to suspending the jobs bank at Ford and Chrysler. But he said this and other help from the union is not enough to save the automakers from their current crisis.
"To be honest with you, right now if the UAW members went in these facilities and worked for nothing…it would not help the companies that much," he said.
He said the union also is willing to have the companies delay billions in payments to the trust funds that will assume responsibility for retiree health care coverage in 2010, although he said that such a move would require court approval. Those payments are not due until next year.
The shift of those obligations, estimated at about $100 billion, was a major victory for the automakers in the 2007 labor agreement.
CNN correspondent Brooke Baldwin contributed to this report.
Oil prices continued falling on Tuesday, tumbling to 3-1/2 year low, as concern about the floundering global economy and falling demand again took center stage.
U.S. crude for January delivery fell $2.32 to settle at $46.96 a barrel. It was the lowest closing price since May 20, 2005, when oil settled at $46.80 a barrel.
A day earlier, oil prices plummeted more than $5 a barrel in the wake of a spate of gloomy economic reports.
"People are worried about their jobs, about their ability to pay for Christmas," said Tom Orr, head of research for brokerage Weeden & Co.
Slowing economy: Businesses and consumers in the United States, the world’s largest oil consumer, have been under intense pressure.
High unemployment and potential collapse of the U.S. auto industry have led many to cut back on fuel use in spite of falling gasoline prices.
During the past four weeks, U.S. demand for gasoline has fallen to about 9 million barrels a day, down 2.8% from last year, according to the Energy Department. On Tuesday, motorist group AAA reported that gas prices fell for the 76th consecutive day to an average of $1.812 per gallon.
Stocks have also taken a pummeling, as the Dow Jones industrial average lost 7.7% on Monday.
"People are getting slaughtered in the market, and they’re getting laid off left and right," said Orr.
Inventories: A government report scheduled for release on Wednesday is expected to show a 2 million barrel increase in U.S. crude inventories, according to analysts polled by financial information firm Platts.
Last week the report showed crude stockpiles had spiked higher than expected, and helped drive prices lower.
Weekly reports on energy inventories can naturally fluctuate from week to week as tankers are delayed, weather disrupts production, or other unforeseen events alter oil’s import and production schedule. But if supplies continue to build, it could be another signal that U.S. crude use was dropping, according to Orr.
"If [Wednesday’s] number doesn’t balance out tomorrow, that could make people a little more nervous," said Orr free credit reports.
OPEC: Investors have also been waiting to see what the Organization of Petroleum Exporting Countries will do when it meets on Dec. 17 to discuss crude prices, which have fallen more than 66% since hitting a record high of $147.27 in mid-July.
OPEC members produce about 40% of the world’s oil and include major exporters such as Saudi Arabia and Venezuela. The decline in oil prices has prompted many OPEC members to advocate production cuts in order to keep prices from falling further.
Over the weekend, Saudi Arabia’s King Abdullah said told a Kuwaiti newspaper that $75 a barrel is a fair price for crude.
At an unscheduled emergency meeting in Cairo this weekend to discuss falling prices, OPEC decided to wait until the December meeting to take action, thus refocusing investors onto declining demand.
"OPEC is really having trouble getting ahead of the curve and cutting production as consumption decreases," said James Williams, energy economist with analysis firm WTRG Economics in Arkansas.
Compliance: Many investors believe OPEC nations have been inconsistent in their compliance with the organization’s October decision to take 1.5 million barrels a day off the market.
Some OPEC producers, seeing their oil profits slide due to falling prices, have been reluctant to cut production further, according to Williams.
"As the price drops, the incentive to cheat goes up," he said.
Saudi Arabia, OPEC’s largest producer, said over the weekend that it hoped member nations would meet at least 80% of the goal. Many investors took that statement to mean OPEC had not yet reached its pledge, with some pegging compliance at as little as 60%, according to Orr.
The failure of member nations to fulfill their existing obligations may put the burden of a second production cut squarely on the shoulders of Saudi Arabia, he added.
Sears.com was inaccessible to U.S. shoppers for two hours Friday in what was the most notable Web hiccup of the holiday gift-buying season’s official start.
Other sites, including Amazon.com Inc (AMZN, Fortune 500)., experienced minor slowdowns, according to Shawn White, director of external operations at Keynote Systems Inc., a San Mateo, Calif.-based research group.
Starting a week and a half ago, Keynote began tracking the performance of about 30 big online retailers, logging the time it took to find a product and start checking out.
Keynote’s list includes Wal-Mart Stores Inc (WMT, Fortune 500)., Macy’s Inc (M, Fortune 500)., Circuit City and others; the system takes measurements every 15 minutes from computers in 10 major U.S. cities.
Sears Holdings Corp. (SHLD, Fortune 500)’s site started to crawl at around 9:30 a.m. ET when loading a page on the site topped one minute need cash. From about 10:30 to 12:30, Sears posted a message asking shoppers to try again in a few minutes.
White said Sears was among the retailers that stumbled last year on Black Friday.
But while Sears’ problems returned this year, others including Neiman Marcus seem to have resolved past issues.
Amazon and Target Inc (TGT, Fortune 500)., which uses Amazon’s e-commerce technology, were slower Friday than in recent days, but not unbearably so, White said. At the slowest point, a transaction that took 25 seconds last week required about 40 seconds Friday morning.
Kohl’s Corp. (KSS, Fortune 500) and Saks Inc. (SKS) also had performance problems, according to Keynote data.
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