US equity funds returned to net buying in the week to July 1 as investors moved back into technology shares and reacted to softer labor data. Fund flows also showed a clear split between large-cap stocks and smaller companies, while bond and money market funds drew much larger allocations.

Global markets also moved higher on Friday after weak US payroll growth reduced expectations of a near-term Federal Reserve rate increase. European shares reached fresh highs, Asian markets gained, and gold rose as the dollar eased.

Technology Funds Lead Return to Equity Buying

Investors added a net $1.03 billion to US equity funds during the week, reversing part of the previous week’s $3.47 billion in withdrawals. Technology sector funds received $3.42 billion after investors pulled $19.97 billion from the group one week earlier.

Large-cap funds attracted $7.2 billion, showing that buyers preferred bigger companies with stronger liquidity. Financial funds drew $1.96 billion, while healthcare funds received $1.47 billion. These inflows came as investors looked beyond recent weakness in semiconductor and artificial intelligence-linked shares.

Meanwhile, small-cap funds recorded $694 million in outflows. Mid-cap funds lost $2.1 billion, and equity income funds posted withdrawals of $1.33 billion. The figures showed that the return to equities stayed narrow and focused on selected sectors and larger companies.

The labor report also shaped sentiment. The US economy added 57,000 jobs in June, below market estimates, while earlier payroll figures received downward revisions. The data reduced expectations that the Federal Reserve would raise rates before the end of the year.

Bond and Money Market Funds Draw Larger Sums

US bond funds attracted a net $9.88 billion, extending their inflow streak to 11 weeks. Short-to-intermediate investment-grade funds received $4.22 billion, while general domestic taxable fixed-income funds added $3.53 billion.

By contrast, short-to-intermediate government and Treasury funds recorded $2.1 billion in outflows. Investors also placed $47.82 billion into money market funds, the largest weekly allocation in four weeks. Many buyers therefore kept a large share of capital in lower-risk assets.

Fund activity reflected caution ahead of the payroll report and uncertainty over inflation. Shipping disruptions linked to the closure of the Strait of Hormuz also kept cost concerns in focus.

James Rossiter of TD Securities identified shipping as a major risk this year. He said vessels had been rerouted, reducing available capacity and raising doubts over how much transport costs could add to future inflation.

Global Stocks Rise as Rate Outlook Changes

The MSCI world share index gained 0.4% and headed for a weekly rise of about 2%, its strongest performance in two months. Europe’s STOXX 600 rose 0.6% to a record high and moved toward a 2.6% weekly gain.

David Morrison of Trade Nation said European shares had drawn demand partly due to lower valuations and less exposure to the artificial intelligence trade. His comments also raised questions over whether highly valued US technology stocks could keep leading global gains.

Additionally, Asian markets advanced as chip shares rebounded. South Korea’s KOSPI climbed about 6%, while Japan’s Nikkei rose 1.5%. Purchasing managers’ data also showed expansion across major Asian economies.

Gold rose 1% to above $4,160 an ounce and headed for a weekly gain of 1.8%. The dollar paused after reaching its highest level in more than a year, while Brent crude moved 0.45% higher to $71.12 a barrel. US markets remained closed on Friday for the Independence Day holiday.

Looking ahead, investors will closely monitor upcoming inflation and economic data for clues on the Federal Reserve's next policy move. Market sentiment is likely to remain driven by interest rate expectations and corporate earnings. Technology stocks could continue to lead gains if economic conditions remain supportive.

Also Read: US Stock Market Today: Wall Street Rallies as Soft June Jobs Report Lowers Fed Rate Hike Expectations