Analysts’ forecasts for the five leading U.S. brokerage firms are gloomy for the rest of the year after a profit warning from Merrill Lynch & Co. and mixed earnings results at the other four.

Joan S. Solotar, an analyst at Credit Suisse First Boston, slashed full-year earnings estimates Monday for Merrill and its four main competitors: Morgan Stanley Dean Witter & Co., Goldman Sachs Group, Lehman Brothers, and Bear, Stearns & Co.

In a research report Ms. Solotar cited a potential decline in trading revenues in the second half.

Because of a high level of trading revenues, second-quarter earnings for the four companies did not fall as precipitously as analysts had expected, but they are skeptical about how sustainable that business is. (Merrill, which issued the warning last week, is scheduled to report this month.)

“The sustainability of trading is a particular concern as we enter the second half, not only because volatility and volumes have continued to be lackluster but also because of the considerable contribution made to earnings in the first half, dwarfing banking revenues,” Ms. Solotar wrote.

Her report highlights how the second quarter in particular demonstrated the impact of revenue mix at various firms.

For example, the fixed-income businesses at Lehman and Bear Stearns helped both investment banks beat analysts’ profit targets by 24 cents and nine cents, respectively. But some question whether the fixed-income market will be able to sustain its momentum for the rest of the year.

“Fixed income has run its course,” said Diana Yates, an analyst at A.G. Edwards. The scenario will change again as soon as the equity market makes a comeback, so companies whose numbers were driven by fixed income will be hurt, she predicted .

Credit Suisse cut its 2001 estimates for Lehman by 57 cents, to $5.33 a share, and Bear Stearns by 37 cents, to $4.48 a share. It reduced 2001 per-share estimates for Goldman by 70 cents, to $4.42; Morgan Stanley by 73 cents, to $3.32; and Merrill Lynch by 50 cents, to $2.88.

Equity market volatility was low during June following weak levels in May, which hampered the ability to profit from equities trading, Ms. Solotar wrote.

Trading volumes this month will be negatively affected by the Fourth of July holiday. Ms. Yates said that because it falls on a Wednesday this year people might take more time off and that volumes tend to dip lower during the summer months.

She expects things to pick up by September as the Federal Reserve Board’s recent quarter-point rate cut and the consumer tax break “start to kick in” and there is a return to merger and acquisition deals, as well as more IPO transactions and restructuring.

“We don’t think we’re going to have the first half of 2000 replicated, but we believe we’re positioned to where its going to be more steady and sustainable, led by old economy stocks versus tech stocks,” Ms. Yates said.

Ms. Solotar wrote that brokerage stocks were modestly down 3% on average last month “but in our opinion continue to reflect some amount of recovery in the second half.”

Ms. Solotar and Ms. Yates agree that the performance of investment bank stocks depends on how patient investors are prepared to be.

“We’re going to continue to see good and bad days until we get this cycle behind us,” said Ms. Yates, who thinks brokerage stocks are positive in the long term. “Our advice to investors is to average out on bad news.”

At the close of trading Monday, Goldman shares were down 1.40%. Bear Stearns fell 0.03%, Morgan Stanley 0.75%, and Lehman 3.02%. Merrill Lynch shares rose 0.17%.

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