Shares in online brokerage firms took a dive yesterday after a Wall Street research report suggested that the current quarter may see the first sequential declines in online trading. The report, issued by Credit Suisse First Boston analyst Bill Burnham, said trading volumes rose only slightly in July versus June and were clearly lower than those in April, which saw record activity.
Burnham notes that recent weakness in internet stocks – typically popular vehicles for online investors – appears largely to blame for the drop-off. Bloomberg LP’s Internet Index, which tracks 146 US internet companies with market values over $250m, fell 18% in July. Trading volume of index stocks, meanwhile, dipped 2% after rising 27% in June.
In the wake of the CSFB report, shares in Charles Schwab Corp – the largest internet broker – lost $4.6875, or 11%, to close at $37.75. E*Trade Group Inc fell $4.3125, or 15%, to $24.6875, while Ameritrade Holding Corp dipped $2.75 to close at $21.25 and DLJ Direct Inc shed $2.50 to finish the day at $18.625.
In what could be the most sobering point in Burnham’s research, he notes that there is a chance online trading actually lost share in July to the general market, which posted a 5.6% gain over June volumes. Due to the weak month, the analyst says, it is probable, but not definite, that the third quarter will witness the first ever sequential decline in online trading volumes. He adds, however that: This is clearly a short-term negative for the group. We don’t expect a recovery until late September or early October. รก
