A street sign for Wall Street is seen in the financial district in New York, U.S., November 8, 2021. REUTERS/Brendan McDermid

(Reuters) -U.S. equity funds witnessed a sharp cooling of demand in the week through November 12 as investors grew wary about the durability of the artificial intelligence-driven market rally and indications of weakening labour market conditions in October.

U.S. investors bought just $1.15 billion worth of equity funds during the week, their smallest weekly net purchase since a $557 million outflow in the seven days to October 15.

A fresh pullback in major technology stocks also weighed on sentiment, raising questions over whether elevated valuations remain justified. The Nasdaq Composite Index has fallen 4.8% since hitting a record high of 24,019.993 on Oct. 29.

"While equity valuations are elevated, they may not be as extreme as they appear at first sight," said Mark Haefele, chief investment officer, UBS Global Wealth Management.

UBS's Haefele said that current valuations are well below levels seen in prior bubbles as top tech firms are trading at a 12-month forward multiple of 30 times, while leading tech names were trading at a multiple of over 70 times in 1999.

Meanwhile, weekly inflows in U.S. large-cap funds cooled off to $2.35 billion from $11.91 billion a week ago.

Mid-cap and small-cap funds were under pressure as investors pulled out $1.36 billion and $889 million, respectively from these funds.

The technology sector received $1.74 billion, the smallest amount in three weeks. The healthcare sector, meanwhile, secured $777 million, the first weekly inflow in four weeks.

Investors doubled down on their bets on bond funds as they raised weekly net investments to $8.96 billion in the week from $4.63 billion a week ago.

They acquired short-to-intermediate government and treasury funds, short-to-intermediate investment-grade funds and general domestic taxable fixed income funds of a notable $3.01 billion, $2.06 billion and $1.96 billion, respectively.

Money market funds had a net $4.8 billion worth of weekly sales following three successive weeks of net purchases.

(Reporting by Gaurav Dogra; editing by Mark Heinrich)