'Flash crash' may be sparking stock fund withdrawals

Retail investors have yanked money out of stock mutual funds for 17 straight weeks. And the still unexplained May 6 "flash crash" — when the Dow Jones industrials plunged more than 600 points in minutes before recovering — is increasingly being cited as a key reason the public has been selling.

In a speech Tuesday, Mary Schapiro, chairman of the Securities and Exchange Commission, said the SEC was informed by retail brokers that the Main Street investors they cater to "have pulled back" from the stock market since the flash crash.

To buttress her point, Schapiro noted that stock funds have suffered net outflows every week since the flash crash. In contrast, in all 11 weeks leading up to the mayhem of May 6, net inflows were positive, with retail investors pouring roughly $26.6 billion into stock funds, Ned Davis Research says.

Read Full Article from USA Today

- Posted: 2010-09-07 21:24:24

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