Tough Summer for Brokerages

Summer is a hard time to be a stockbroker. This year, it could also be a hard time to be a brokerage investor.

In the midst of what is historically the slowest quarter on Wall Street, the Amex Securities Broker-Dealer index, which tracks the performance of large broker-dealers and online brokers such as E*Trade(ET Quote) and Ameritrade(AMTD Quote), has dropped 13% in five weeks. The decline virtually wiped out what had been a significant gain in the year to date.

Alarmingly, last week's leg of the downturn occurred as three of the industry's biggest players reported very strong earnings for their May quarter. Lehman Brothers(LEH Quote), Goldman Sachs(GS Quote) and Bear Stearns(BSC Quote) all blew away Wall Street forecasts -- and each saw their shares end the week about 3% below where they began.

"The core question is if anyone really cares about the earnings of these companies, and the fact is that no one does," says Richard Bove, equity analyst at Punk Ziegel. ...