Charles Schwab's ( SCH) exposure to the money market could cost it in coming weeks, particularly if interest rates keep falling, an analyst argued Thursday.

CIBC downgraded the shares to under-performer from market performer, citing the threat of lower interest rates and the possibility the brokerage's trading volume could decline.

"Schwab makes upwards of 20% of its revenue from money funds and likely a significantly greater portion of its earnings," the brokerage said. "If the Federal Reserve reduces rates at its next meeting, we feel investors will further discount the probability of additional rate reductions, which would hurt EPS."

Schwab's shares have been on a tear lately, rising 20% in six weeks as signs emerged that retail investors might be returning to the stock market. It closed Wednesday at $8.73.

But CIBC predicted that any increase in retail volume will be temporary, and that the recent surge mainly reflects the end of the Iraq war. "As we enter the summer months, we feel trading volume will slow. Accordingly, we expect earnings growth to be only modest in 2003."

Schwab's daily average trades were 120,000 in April, up 5% from March, then ticked up to 141,000 in the first days of May. "While such an increase in trading volume is material relative to the 100,000 level seen in February, we are fearful that trading activity will fall below May levels as the summer progresses and enthusiasm for Schwab will decline."