By Telis Demos

The first indicator for how Wall Street is faring in the Trump era is flashing yellow.

Investment bank Jefferies Financial Group reported its first-quarter earnings late on Wednesday, showing a nearly 4% year-over-year drop in capital markets and investment-banking revenue. The analysts who follow the company had been expecting a more-than-10% jump, according to estimates compiled by Visible Alpha.

Mergers-and-acquisitions advisory revenue at Jefferies did pick up, rising 17% from a year earlier in the quarter. M&A fees are often booked when a deal closes, and so can reflect agreements announced some time prior. That result is pretty solid considering that overall in 2024, global M&A volume was up 13%, and just 9% in the U.S., according to Dealogic. Yet in 2025 through mid-March, U.S. M&A volume is down versus a year earlier.

Clearly, the year so far hasn't been the bonanza that many had been anticipating to be unleashed by President Trump's second presidency. It appears that many Wall Street clients have been holding off on deals and other big financing projects until there is more clarity on trade policy, the fiscal budget and interest rates.

Jefferies's fiscal quarter covers three months ending Feb. 28, making it the first on Wall Street to show 2025 performance. Jefferies shares were down nearly 10% on Thursday afternoon. Other Wall Street firms were also down, with Goldman Sachs, Morgan Stanley and Evercore all off by 2%-plus.

Still, Wall Street isn't in hibernation, nor are indicators of corporate risk surging. Jefferies did report a year-on-year jump in debt underwriting revenue. That suggests that borrowers are still finding a receptive market if, for example, they want to refinance and lock in today's rates to sidestep whatever might be coming in the next year or two.

Corporate credit spreads -- a measure of the cushion investors demand to hold their debts -- are around where they were a year ago, and are even lower for some companies, according to the ICE BofA index data compiled by the Federal Reserve.

Jefferies President Brian Friedman, said that client activity levels didn't reflect a downturn in expectations, but that extra caution has crept into thinking and planning.

"Sitting today versus four months ago, there's a perception of greater fragility in the economy. There is concern that interest rates may not ease to the degree people thought they would ease," he said.

He also said of clients lining up deals: "There is strong dialogue taking place. ... We need to see what happens next in terms of confidence and visibility re-emerging. We suggest it may be beginning."

For now, though, the market appears to be in show-me mode for Wall Street's first quarter results.

Write to Telis Demos at Telis.Demos@wsj.com

(END) Dow Jones Newswires

March 27, 2025 13:24 ET (17:24 GMT)

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