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Online brokers soar despite analyst&#039s caution

Investors paid no attention to the caution of Credit Suisse First Boston's new Internet brokerage analyst James Marks as he issued "hold" ratings on Ameritrade (Nasdaq: AMTD), Charles Schwab (NYSE: SCH) and E*Trade (Nasdaq: EGRP). Online brokers were trading higher Friday.

Marks gave the online broker field mixed markets. He gave a "strong buy" to TD Waterhouse Group Inc. (NYSE: TWE) and National Discount Brokers Group Inc. (NYSE: NDB). Those ratings did add fuel to the online brokerage buying fire Friday. NDB was up 5 5/16 to 34 15/16, or 20 percent, and TD Waterhouse was up 2 9/16 to 15 5/16, or 20 percent.

He also rated DLJ Direct (NYSE: DIR) "buy" as shares jumped 12 percent, or 1 7/8 to 18 1/8. Marks' "hold" ratings also apparently cheered up investors. Ameritrade was up 11 percent, or 2 1/8 to 21 3/16, Charles Schwab was up 0.3 percent, or 1/8 to 42 1/8 and E*Trade was up 7 percent, or 2 1/16 to 33 7/16.

The period of unrivaled dominance is coming to an end for online brokers, Marks wrote in a report. Financial services firms such as Morgan Stanley Dean Witter & Co. and American Express Co. are targeting online brokers and may curb trading volumes. Offline companies are also showing much more strategic vision and are starting to set the pace for innovation, Marks wrote. He added that Internet brokers may have been too optimistic in setting profitability estimates based on current trading activity, which he expects to decline.

DLJ Direct recently said it was considering more bricks and mortar branches to complement the web site.

Marks said the recent decline in Internet brokers' share prices may not reflect the possibility of a sharpening downturn in trading levels.

Kingh/Trimark (Nasdaq: NITE), which recently warned it would miss third quarter earnings due to lower than expected trading volumes, was also rocketing up Friday, as shares rose 3 1/4 to 37 3/4, or 9 percent.

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