NEW YORK (AP) -- Shares of major brokerage and investment firms fell Monday amid a slump in the broader market and in financial shares. The decline in brokerage stocks occurred despite Citigroup upgrading the sector and several companies in response to the impact on interest rates and markets of the Federal Reserve's policies.
Global financial markets have been roiled by Federal Reserve Chairman Ben Bernanke's statements on Wednesday that the central bank likely will begin reducing its bond purchases later this year. The Fed has been buying $85 billion in bonds each month to keep long-term interest rates low and stimulate the economy. The Dow Jones industrial average dropped more than 200 points Wednesday and lost another 353 points Thursday, wiping out six weeks of gains.
Bond prices fell, and the yield on the benchmark 10-year Treasury note climbed to its highest level since August 2011. Stocks recovered on Wall Street Friday, but dropped sharply on Monday in a broad selling wave.
That sort of whipsaw and volatility in markets means good business for brokerages, which earn fees from trades.
With the interest rate "genie out of the bottle," Citigroup analyst William Katz said, he was upgrading Charles Schwab Corp. to "Buy" from "Sell" and FXCM Inc., a provider of online foreign exchange trading services, to "Buy" from "Neutral." Katz and his colleagues also raised their 12-month target prices for Schwab to $24 from $14, for FXCM to $21 from $14, for TD Ameritrade Holding Corp. to $25 from $18, and for LPL Financial Holdings Inc. to $40 from $39.50.
In addition, the analyst upgraded T. Rowe Price to "Buy" from "Neutral" and Eaton Vance to "Neutral" from "Sell" to reflect an expected shift putting companies that focus on the U.S. markets in a stronger position than those with more international business. The 12-month target for T. Rowe Price Group Inc. was lifted to $82 from $73.
At the same time, the analysts lowered target prices for AllianceBernstein Holding LP, Franklin Resources Inc., BlackRock Inc. and Legg Mason Inc. — firms with a greater international exposure.
In early afternoon trading, Schwab dipped 13 cents to $20.51, T. Rowe Price was down $1.42 at $70.65, TD Ameritrade declined 3 cents to $23.56, AllianceBernstein fell $1.56, or 7.2 percent, to $20.21, Franklin Resources lost $3.33 at $133.69, Legg Mason was off 61 cents at $29.92 and BlackRock fell $3.84 to $244.83.