GRAPHIC-US equity fund outflows surge as investors dial down rate cut expectations

March 20 (Reuters) - U.S. equity funds witnessed the largest weekly net sales in nearly 2-1/2 months in the week to March 18 as expectations of higher oil prices, a hotter-than-expected inflation reading and the Federal Reserve's cautious stance dampened hopes for rate cuts this year.

Investors shed U.S. equity funds of a net $24.78 billion in their largest weekly net sales since $25.89 billion divestments in the week to January 7, LSEG Lipper data showed.

U.S. large-cap funds lost a net $36.11 billion as weekly outflows surged to the highest since mid-September 2025. Mid-cap funds also faced a net $606 million outflow, but small-cap funds saw roughly $1.75 billion worth of net purchases.

Sectoral funds saw a net $793 million in inflows following a week of outflows as investors pumped roughly $1.55 billion - the most in six weeks - into the industrial sector funds.

Weekly net investments in bond funds, meanwhile, surged to a five-week high as investors poured roughly $11.53 billion into these funds.

Short-to-intermediate government and treasury funds and short-to-intermediate investment-grade funds saw a significant weekly net purchase of $5.12 billion and $3.9 billion, respectively.

Money market funds, meanwhile, saw a net $32.73 billion weekly investment as safe-haven demand extended into a fifth successive week.

(Reporting by Gaurav Dogra; Editing by Jan Harvey)