Investment bank shares fell Wednesday as several analysts reiterated lukewarm ratings for the companies and reduced earnings estimates.

Shares of Morgan Stanley Dean Witter & Co fell $1.25, or 1.56%, to close at $79.0625. Merrill Lynch & Co. dropped $1.3125, or 1.88%, to $68.50; Lehman Brothers $3.625, or 5.62%, to $60.875; and Goldman Sachs Group Inc. $3.125, or 3.13%, to $96.6875. Other financial stocks fell, too, as the market gave back some of its recent gains. The American Banker index of 225 banks declined 0.88%, and the index of top 50 banks dropped 0.32%.

But brokerage companies took a bigger hit. “Broad declines on both exchanges bear part of the blame for the weakness in brokerage fundamentals,” wrote Richard K. Strauss of Goldman, Sachs & Co. in a research note. “The choppy market environment weakened demand in virtually all of the underwriting segments.”

Merger and acquisition activity also slowed in the third quarter, as did investment banking, which “should have a material effect on brokers’ revenues in the quarter,” Mr. Strauss wrote. “Volumes rebounded from the slow activity during August and September but not enough to put this quarter on pace with the previous one.”

He cut his quarterly earnings forecast for Lehman, which he rated “market perform,” by 16 cents, to $1.20. He also cut his forecasts for Morgan Stanley — by 11 cents, to $1.20 — and Merrill Lynch — by 8 cents, to 80 cents. Both companies are on his “recommend” list.

Dean Eberling, an analyst at Keefe, Bruyette & Woods Inc., has issued several reports taking a similar view. In his most recent one, published Wednesday, he wrote that he remains concerned that, as net new sales stay low and market gains fade, “the growth comparisons are only going to get tougher over the remainder of this year into the first quarter of 2001.”

This year could be the industry’s slowest since 1994, he wrote.

With respect to initial public offerings, the “past two weeks in particular have slowed significantly, which has essentially squelched the possibility that the fourth quarter will witness any significant lift in investment banking revenues derived from equity underwriting,” Mr. Eberling wrote.

He has rated Goldman Sachs, Lehman, and Merrill Lynch “buy” and Morgan Stanley and Bear Stearns “market perform.” The industry seems “very fairly valued,” he wrote.

Amy Butte, an analyst at Bear, Stearns & Co., also wrote on Wednesday that she remains “cautious” about capital markets stocks “until we get a clear picture for next year.”

On the other hand, in a statement published Monday, Mr. Eberling wrote that M&A activity has gained momentum and that recent deals, “combined with the release of earnings, helped to support the group and fuel ever-higher valuations.”

Mr. Strauss wrote that brokers’ revenues will get some support from the equity market, which bounced back last month as “exchange volumes ramped up notably, surpassing this spring’s levels.”

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