(March 16) – “Capitulation?” asks Stacy Forster in today’s Wall Street Journal.

“Charles Schwab Corp., which epitomized the boom times for online brokerge firms, warned Thursday that layoffs may be inevitable as wary investors continued to pull back from Wall Street.”

“The company had gone on a hiring binge in recent years and, along with many online firms, had spent heavily on advertising and technology in anticipation of a continued explosion in trading. In fact, Schwab increased its labor force by about 30% in the past year, to 26,000 employees, before reducing the ranks by about 850 through attrition and a hiring freeze.”

“Now, the San Francisco company is acknowledging that it had overbuilt for an online-trading frenzy that wasn’t sustained.”

“The Schwab warning is significant, because it comes at a time when Wall Street — despite the crash-like plunge in technology stocks from the year-ago peak — has generally avoided the across-the-board layoffs that followed other major pullbacks in the stock market. After the October 1987 stock-market crash, for example, fully staffed Wall Street firms began slashing payrolls and jettisoning whole lines of business. Schwab, in fact, has not had significant layoffs since the post-crash days of 1988.”

“Schwab’s stock is down about 60% from the 52-week high of $44.75 last March, hit not long after the Nasdaq Composite Index reached 5000, before beginning its yearlong slide. The shares Thursday rose 5%, or 86 cents to $17.90, in 4 p.m. trading on the New York Stock Exchange.”

“Stung by a drop in trading activity last month, Schwab also put Wall Street on notice for the second time in a month that its earnings in the first quarter may not meet their already lowered estimates.”

“Christopher Dodds, Schwab’s chief financial officer, said the company was conducting a review that may lead to'”mandatory staff reductions.’

” ‘This translates into a recognition on our part that it might be a more prolonged time before we recover and we need to take additional action to proactively address a weak environment,’ Mr. Dodds said.”