M&A Thaw Won't Melt Deep Freeze for Brokerage Stocks

The recent rash of multibillion-dollar mergers has warmed investors to the idea that corporate America is shaking off its slumber. But while the spike in activity may have psychological importance for investors, it probably isn't enough to lift the shares of the companies who arrange the deals.

"I think it's too early to tell," said James Mitchell, brokerage analyst at Putnam Lovell Securities. "It's a positive, but I'm not sure if it really gives you, or implies, a real rebound."

Brokerage firms get a big chunk of revenue from advising and financing M&A. Like the other segments of the investment banking business, success is tied to the economic and profit outlook; companies tend to expand when they're doing well. For that reason, M&A volume has dropped sharply, as strapped companies have pared expansion plans and investment initiatives. ...