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

On Monday,

Knight Capital

I:IXIC

, 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) - Get Report

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), 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.

"July was an expectedly quiet month for the market, especially around the Fourth of July holiday," said Knight Chairman and CEO Thomas M. Joyce. "While market activity may have been boosted somewhat by quarterly corporate earnings reports, we believe the same geopolitical, economic and market concerns from June continued to trouble investors."

Meanwhile, at Bear Stearns, trading revenue is "likely to weaken," says Merrill's Moszkowski. In particular, he says trading volume in mortgage-backed should be down about 10% from last quarter. Trading in mortgage-related products is a staple business for Bear Stearns.

Bear Stearns' third quarter ends in September.

"While some of this was apparent a couple of weeks ago when we published our mid-quarter update, we are now close enough to the end of the quarter that, in the interests of realism, it appears that we need to assume that volumes will not improve enough in August to allow the prior forecast to hold," he said in a report on Monday.

The weak performance at the broker prompted Moskowski to lower his third quarter estimates to $2.81 a share, down from $3.01 a share. Analysts, on average, are expecting Bear Stearns to $3.03 a share, according to Thomson Financial.