Stock Watch: Online Brokers Fall After Schwab’s Warning

Charles Schwab (NYSE: SCH) reported record earnings on Friday, but a warning it made about shrinking profit margins hurt many stocks of online brokers. Charles Schwab earned $151 million, or 18 cents a share, in the second quarter, a gain of 98 percent from the same period last year. The company, however, added that its investments in new employees, technology and advertising could slow down profit growth.

Shares of Charles Schwab closed down 2-7/16 to 52-7/16. Meanwhile, shares of Ameritrade (Nasdaq: AMTD) were down 1-11/16 to 34-1/14, E*Trade (Nasdaq: EGRP) fell 1-1/2 to 37-1/2 and National Discount Brokers (Nasdaq: NDB) fell 2-15/16 to 48-7/16. One problem for online brokers is that more and more traditional brokers are starting to get into the game, and the market is getting crowded.

The market for online investment banking is still largely untapped, however. Shares of online investment bank Wit Capital (Nasdaq: WITC) managed to gain 1/16 to 33-7/16 on Friday.

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