Magazine article American Banker

Schwab's Results Help Ignite On-Line Brokerage Stocks

Magazine article American Banker

Schwab's Results Help Ignite On-Line Brokerage Stocks

Article excerpt

On-line brokerage stocks, buoyed by rising industrywide trading volume and optimism over interest rates, have had solid gains in the last two trading days.

Additional good news came Monday as Charles Schwab & Co. announced that its average daily revenue-generating trades, including its on-line and traditional trading activity, increased to 144,300 in October, up 10% from September and 43% from a year earlier.

The market extrapolated from that a bright outlook for most on-line brokerages.

Schwab's "October activity report painted a fairly rosy picture for on-line trading," said Michael A. Flanagan, an analyst for Financial Service Analytics Inc.

Ameritrade Group Inc. rose $4.50, to $26.4375; E-Trade Group $1.375, to $38.125; DLJdirect $1.25, to $19.50; and Charles Schwab 37.5 cents, to $43.25.

Schwab's report was issued Monday after big increases in most brokerage stocks Friday, partly spurred by a bullish report on brokerages from Hambrecht & Quist LLC.

Greg Smith, an analyst at Hambrecht, attributed the upswing in brokerage stocks to three factors. First, on-line brokerage stocks, like other financial stocks, had been hammered since April because investors were concerned about rising interest rates.

Second, the on-line firms have added "millions of accounts" since their stocks began their downturn.

And third, the Nasdaq overall index, having hit new highs in nine of 10 trading days through Friday, caught the attention of retail investors. As a result, trading volume for November is looking even better than for October.

Meanwhile, the recent success of several initial public offerings has added to retail investors' enthusiasm.

October "volumes were just amazing," Mr. Smith said. "Conditions were ripe for a rally; we have a return to the heightened euphoria we saw in January and April. …

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