UPDATE 1-U.S. fund investors regain risk appetite as Dow breaches 23,000

(Adds details on mutual funds and ETFs, investor quotes, table, byline) NEW YORK, Oct 19 (Reuters) - U.S. fund investors regained an appetite for risk over the last week, rushing into U.S. and emerging-market stocks, according to data on Thursday from Lipper. Stock mutual funds and exchange-traded funds (ETFs) overall attracted $5.4 billion in the week ended Oct. 18, while emerging markets pulled in $2.3 billion, the most cash since March, according to Thomson Reuters' Lipper research unit. For equity ETFs, the SPDR S&P 500 and iShares Core MSCI Emerging Markets contributed the two largest net positive flows, attracting more than $4.6 billion and $1.4 billion in new cash respectively, Lipper said. Invesco Ltd Global Market Strategist Kristina Hooper said economic growth was not enough to explain the stock gains. The S&P 500 has delivered more than a 16 percent return this year, including dividends, and some 350 percent since its March 2009 lows, yet U.S. gross domestic product growth has been averaging around 2 percent annually. "This is not explosive growth, and yet we have a stock market that's moving higher largely based on expectations of what's going to happen," said Hooper. U.S. President Donald Trump is looking to overhaul the country's corporate tax system, a move that would be seen as a positive for stocks. "I'm concerned in the U.S. that there's greater vulnerability because stocks have been on a tear and a lot of it has been based on sentiment as opposed to fundamentals," said Hooper. Stocks have posted a string of record highs in recent weeks, and the Dow closed above 23,000 for the first time on Wednesday. Paul Kim, director of ETF strategy at Principal Financial Group Inc, said companies were using keen maneuvers to boost profits even when sales growth was minimal. Companies were reducing their outstanding shares using buybacks, he said, pushing up profits as a percentage of a declining number of shares. Domestic-focused stock funds pulled in $1 billion during the week, the most since August. Non-domestic equity funds attracted $4.3 billion, marking a fifth straight week of inflows. Swings between sectors continue to generate a powerful undertow in otherwise tranquil markets. Healthcare and biotechnology sector funds posted $382 billion in outflows during the week, marking the category's largest withdrawals since August, according to Lipper. A bipartisan deal to stabilize Obamacare by restoring federal subsidies to health insurers picked up Republican support in the Senate on Thursday, despite Trump's opposition, but still faces an uphill battle. And the bullish mood on stocks did little to shake demand for bonds. Taxable-bond funds took in $4 billion for the week, according to Lipper, and the category has posted outflows just three weeks this year. Low risk money-market funds took in $5.1 billion. But Treasury funds posted $391 million outflows, the most withdrawn since July, and high-yield outflows of $450 million marked the largest withdrawals since August, Lipper said. The following is a breakdown of the flows for the week, including mutual funds and ETFs:

Sector Flow Chg % Assets Assets Count ($blns) ($blns) All Equity Funds 5.354 0.08 6,514.294 12,171 -Domestic Equities 1.045 0.02 4,450.565 8,671 -Non-Domestic Equities 4.309 0.21 2,063.729 3,500 All Taxable Bond Funds 4.037 0.16 2,587.628 6,053 All Money Market Funds 5.101 0.20 2,596.165 1,067 All Municipal Bond Funds 0.536 0.13 399.952 1,472

(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Rosalba O'Brien)