Online Trading Heats Up Again

Online brokerages are enjoying a rebound in trading activity, as small investors jump back into the market after the spring tech-stock crash.

Charles Schwab Corp., the largest online brokerage, said Monday that overall trading activity rose 10% in July from June as more customers stepped back in to play the market.

Stock and mutual fund trades averaged 271,000 a day, up from about 246,000 in June, the San Francisco-based firm reported.

The July figure was up 43% from July 1999.

Trading activity slumped as the Nasdaq market plummeted in April and May, leaving many investors who came late to the tech-stock game nursing big losses.

But in July, Nasdaq climbed back to its highest level since April, before sliding late in the month.

“That underlying confidence in the markets for the long term is still there” among many small investors, said Gregory Smith, an analyst at Chase H&Q; in San Francisco. “People may have lost some money in the turmoil of March [and] April . . . but they’re still putting money into the market.”

Schwab downplayed the pickup in activity. Its mutual fund business took in less in net new cash in July than in June.

Still, for the second month in a row, each of Schwab’s five major fund categories (domestic, international, balanced, taxable bond and tax-exempt bond) had positive net cash inflows, Smith said. “That hasn’t happened for almost two years.”

Schwab client assets totaled $937 billion at month’s end, up 36% for the past year and 1% from June.

Schwab shares (ticker symbol: SCH) gained $1 to $40 on Monday, highest since March. Rival E-Trade Group (EGRP) gained 94 cents to $16.31 and Ameritrade (AMTD) rose $1.06 to $14.69.

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‘Rally Leaders: Mid-Size Stocks

In their search for attractive stocks this year, many investors are looking to the middle--that is, to mid-size stocks. The Standard & Poor’s index of 400 mid-capitalization shares rose 1.2% to a record on Monday. So far this year, it’s up 16.7% compared with a 1.5% rise in the big-stock S&P; 500 index and a 7.6% rise in the small-stock S&P; 600 index.

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Weekly closes and latest for the Standard & Poor’s Mid-Cap 400

Monday: 518.98

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Source: Bloomberg News