NYSE Gets Upgrade in Exchange Rebound

NEW YORK (TheStreet) -- NYSE Euronext (NYX)'s recent underperformance has led to an upgrade from Stifel Nicolaus Matthew Heinz, who nonetheless favors Nasdaq Omx Group (NDAQ) and CME Group (CME) for investors looking to bet on a recovery in U.S. trading volumes.

NYSE shares have fallen 15.3% during the quarter through Monday's close, underperforming both the broader market and comparable companies.

This quarter's 15% selloff is overdoing it, according to Stifel Nicolaus.

"While overall volume trends remain weak, [NYSE] has clawed back some of its prior share losses in US/EU equities and EU derivatives," Heinz wrote in a note published Tuesday. He upgraded NYSE shares to "hold" from "sell."

Heinz also argues that the surprise falloff in technology revenues in the first quarter "occurred as a result of timing issues." He does not expect "an accelerated or sustained decline in the technology segment." He also believes NYSE will show it is making progress cutting costs.

Still, Heinz believes NYSE will "continue to face headwinds on the volume front in European derivatives, particularly given its leverage to short-term interest rate futures (euribor) in the midst of challenging pan-European economic conditions." He prefers CME and Nasdaq, however, as the least expensive and purest way to play a recovery in US equity capital markets."

-- Written by Dan Freed in New York.

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