Investors last month lowered their stock market bets made on credit as the spring rally gave way to another slide.
The New York Stock Exchange said Friday that margin debt outstanding--money borrowed from member brokerages, generally to buy stocks--fell 2.3% in June to $170 billion. It was the first decline in margin debt since March.
In May, margin debt rose 4.3% to $174.2 billion as investors borrowed more and as brokerages called in fewer loans, thanks to the market's spring rally.
The June figure "tells us the improvement in equity markets is not completely definitive, but when you look at the prior months the trend is still encouraging," said Anthony Chan, chief economist at Banc One Investment Advisors.
Chan said he looks for increasing margin debt as a sign that an equity market rally can be sustained, as investors take on more risk.
Investors can typically borrow as much as 50% of the value of their holdings to buy more stocks. Buying shares on credit boosts investors' profit when prices rise, but losses are magnified if prices fall.
Margin debt hit a record-high $278.5 billion in March 2000, when technology stocks peaked.
The total value of U.S. stocks was little changed at $15.66 trillion in June, down from $15.84 trillion in May, said Charles Biderman, chief executive of Santa Rosa, Calif.-based investment research firm TrimTabs.com.
Margin debt in June equaled 1.1% of the market value of all U.S. public companies, unchanged from the previous month.