(December 22) – “Wall Street is accelerating its belt-tightening and job-cutting as a tumultuous year in the stock market draws to a close,” writes Charles Gasparino in today’s Wall Street Journal.

“Charles Schwab Corp. and Merrill Lynch & Co. are the latest firms to respond to the stock market’s sour mood. At issue for the big Wall Street-focused firms: a decline in several once-profitable lines of business, such as new stock issues from Internet companies, junk bonds and telecommunications financings, which has pinched profits and caused management to rethink spending for next year.”

“Merrill Lynch, according to people with knowledge of the move, is planning to cut jobs in the New York securities firm’s vaunted research department in the coming weeks in response to the market’s recent decline. Other cuts are likely in the months ahead at the nation’s largest securities company, particularly if the market continues to slide, the people say.”

“Meanwhile, Merrill’s cross-country rival, San Francisco’s Charles Schwab, announced that it will slash the salaries of 750 top executives, including the firm’s co-chief executives, Charles Schwab and David Pottruck, in the next couple of months as a way to cut costs and avoid layoffs. And a spokesman for online broker Ameritrade Holding Corp. confirmed that the company had laid off some temporary employees, but it declined to say how many or where they had worked.”

“The culprit for the pressures, Wall Street executives say, is the technology-stock-filled Nasdaq Stock Market, which has fallen nearly 43% so far this year and has sent chills across Wall Street.”

“Nonetheless, this year won’t be so bad. The Securities Industry Association, Wall Street’s main trade group, expects securities firms to post record profits of $51 billion this year, buoyed by a strong first quarter. But things have deteriorated since then. The SIA says fourth-quarter profits have declined amid the market’s rout — nearly 40% from the previous quarter — and analysts expect the tough times to continue into the new year.”

“Shares of most of the big brokerage firms have fallen below their high points earlier in the year, before problems in certain areas of the market, such as in the telecom sector and junk bonds, began squeezing profits. One exception, ironically, has been Merrill Lynch, whose shares have risen more than 60% during the past 12 months, to $64. Part of the reason is Merrill’s lack of exposure to telecom deals, which have hit the skids in recent months and pinched profits at Morgan Stanley Dean Witter & Co., one of the top telecom underwriters on Wall Street.”