Street's Long, Hot Summer Could Get Longer

Trading volume is drifting away with the summer days, and there a signs the slowdown may continue into the fall.

On Monday, Knight Capital(NDAQ - Cramer's Take - Stockpickr), one of the largest Nasdaq Stock Market trade execution firms, said average daily trade volume in July fell from the previous month's level. Similarly, discount broker Charles Schwab(SCHW - Cramer's Take - Stockpickr) also said trading activity by its customers fell 5% in July from the June tally.

At the same time, Guy Moszkowski, an equity research analyst at Merrill Lynch, cut the third-quarter estimates for Bear Stearns(BSC - Cramer's Take - Stockpickr), citing tough market conditions for the Wall Street investment firm.

The stock market has faced a rough patch during the summer, in what is said to be the first real slow down since 2003. Last week, analysts started to debate whether the bull market that began over three years ago is finally over. Growth has slowed in the U.S., and after the 17 consecutive rate hikes the Federal Reserve decided last week to pause raising short-term interest rates.

Summer is a historically a slow season for the brokerage business. But the activity reports from Knight and Schwab are an indication that there may be more to the slowdown than investors simply taking some time off from trading.

Knight said that the average daily dollar volume of trades in July fell to $7 billion, down from $7.9 billion in June, and down from $7.3 billion in July 2005. Schwab said that clients' daily average trades were down 5% from June, but up 15% from the same quarter last year. Net new client assets dropped 12% from June to July to $6.8 billion.