Wall Street has posted its worst quarterly loss since the 1987 stock market crash, as trading profits and underwriting fees tumbled in the wake of this year's financial market plunge.
The pretax loss at brokerage firms, announced Tuesday, totaled $623 million in the second quarter, compared with a profit of $2.38 billion in the same period of 1993. Quarterly revenues dropped 8 percent to $16.43 billion from $17.95 billion.The industry deficit, the steepest since brokerages lost a total of $2.33 billion before taxes in the fourth quarter of 1987, was not entirely unexpected.
Over the past two months, individual brokerages have separately released results reflecting the damage from the Federal Reserve Board's decision in February to begin raising interest rates for the first time in five years. The rate reversal has pummeled the bond and stock markets.
However, some analysts were surprised by the extent of the collective loss reported by the 302 New York Stock Exchange member firms that do business with the public. The NYSE is the world's largest stock exchange.
"It's a big deal because that exceeds any loss for any quarter since 1987," said Perrin Long, a securities industry analyst with First of Michigan Corp. in Chicago.
Particularly hurt were large New York-based brokerages with heavy trading in bonds. Bonds pay fixed interest rates whose value is eroded by higher rates on newly sold securities. Profits from bond trading, on behalf of clients and for brokerages' own purposes, fell 52 percent in the quarter from the 1993 period, according to the Securities Industry Association.