(
)
Despite a bubbly stock market, few on Wall Street are popping open the champagne.
For while the Standard & Poor’s 500 Index yesterday hit a four-year high, trading volume, the life blood of most financial firms, is off sharply in the first eight weeks of 2012 vs. last year — which itself marked one of the slowest years in memory.
In fact, through Feb. 22, trading volume is as anemic as it was in 2007, when the market started to show signs of serious mortgage problems.
January’s average daily volume is off 15 percent from the year-ago period, industry statistics show. February volume, through Wednesday, is off nearly 11 percent, according to research from the Tabb Group.
“Whatever you want to call it, it’s ugly right now,” said Larry Tabb, head of Tabb Group.
Activity is not much better in fixed-income trading.
Trading in areas like funky derivatives tied to commodities and currencies is seeing volumes down 11.2 percent year-over-year, according to data from the Federal Reserve.
Trading in interest-rate derivative products also is off by 25.9 percent.
Overall, fixed-income volumes are down 10 percent for the year, financial analyst Meredith Whitney told The Post.
“Without genuine volume associated with the big moves we’ve seen in stocks over the past few weeks, I don’t think many traders think this recovery is real,” said one trader with a large New York hedge fund.
The trading slowdown on Wall Street doesn’t portend well for profits at some of the biggest investment banks on the Street like Morgan Stanley and Goldman Sachs, which have been hammered by choppy markets — a fact that’s resulted in a wave of layoffs.
The Post reported earlier this year that some large Wall Street firms could be looking at further staff cuts next month.
Volumes, which began to nosedive in March 2009, have fallen off a cliff primarily because deep-pocketed investors, including mutual funds and hedge funds, are skittish about diving back into stocks.
Indeed, the so-called sovereign debt crisis saw investors last summer yank $36 billion out of stocks, according to the Tabb Group.
And market uncertainty persists even as broader issues such as the debt woes of Greece and other European nations are close to being resolved — at least in the near term.
Regulatory changes, including the implementation of the Volcker rule, which will bar banks from trading using their own cash, also is creating a trading vacuum.
Jamie Selway, head of liquidity management at Investment Technology Group, notes that many risk-averse investors are opting to purchase investments that are tied to the performance of segments of the markets or indexes rather than buying individual stocks — another point that is driving trading lower.
To be sure, the optimists on Wall Street point out that 2012 is just eight weeks old and volumes could easily perk up — as marts press toward highs not seen in four years.
But some market participants are debating that low volumes may be a fact of life that Wall Street may be forced to live with for a while — more secular than cyclical.
“There is no doubt, this is a secular phenomenon,” financial analyst Whitney said.