Individual investors dumped financial stocks on Thursday, dragging down shares of major brokerage firms and banks such as Robinhood, Webull, and other companies.
Robinhood's stock plunged 11.5% and Webull dropped 9%. Rivals etoro and Interactive Brokers were down 5.6% and 6.2%, respectively. Charles Schwab was escaping relatively unscathed; its stock was down a modest 0.8%.
Banks were also falling sharply. Morgan Stanley and Goldman Sachs fell 6.6% and 7.1%, respectively. JPMorgan Chase fell 4.1%. Wells Fargo and Bank of America were down 3.6% and 3%, respectively.
The overall stock market was deep into the red following a selloff in technology stocks. The benchmark S&P 500 Index dropped 3.9% and the tech-heavy Nasdaq fell 5.1%.
Brokerage firms have benefited over the past year from strong activity among individual investors who have been buying and selling stocks and trading on margin, meaning that they have borrowed from their brokerage firms to buy shares. Margin debt stood at $1.48 trillion at the end of September, according to data from brokerage industry self-regulatory organization Finra. That figure is up from $1.22 trillion at the end of last year, but down slightly from a record $1.5 trillion at the end of June.
Other financial services companies weren't spared from Thursday's carnage. The KBW Nasdaq Bank Index slid 3.4% and the Vanguard Financials ETF, which tracks a broad basket of financial stocks, dropped 2.4%.
Morgan Stanley and Goldman Sachs operate large trading desks and investment banks that have benefited this year from an uptick dealmaking and initial public offerings. Both Morgan Stanley and Goldman Sachs were lead underwriters on SpaceX's historic initial public offering in June. They are also underwriters for Anthropic's IPO. The artificial-intelligence company has been expected to go public this month.
A slowdown in dealmaking activity and companies going public, which typically accompanies a bear market in stocks, would hurt the fees investment banks like Goldman Sachs have been reaping.
Morgan Stanley also operates a large wealth management arm that has raked in hundreds of billions of dollars of net new assets this year thanks in part to IPOs minting new millionaires. For the third quarter, the company posted $232.4 billion in new assets, with just over half that figure associated with IPOs.
Wealth management companies, which generate fees on assets under management, have benefited from a rising stock market. Their stocks were falling Thursday. Raymond James Financial and LPL Financial were down 2.4% and 3.8%, respectively.
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