Investment bank Jefferies Group LLC, which is now part of Leucadia National Corp (LUK.N), reported a 34 percent drop in quarterly profit as uncertainty about the U.S. Federal Reserve's stimulus program hurt fixed-income trading.
Net income fell to $42 million from $63.5 million, while revenue from fixed-income trading fell 27 percent to $213.3 million from a year earlier.
Revenue from investment banking also fell 7 percent to $277.1 million as the M&A market is yet to fully recover from the European crisis.
Chief Executive Officer Richard Handler described the bond trading environment as tepid and cautious, indicating that the fixed-income divisions of larger investment banks were also bracing for a tougher quarter.
Jefferies, which kicks off the reporting season for investment banks, is often viewed as an indicator of performance at Wall Street banks such as Goldman Sachs Group (GS.N) and Morgan Stanley (MS.N).
Fed Chairman Ben Bernanke said last month that the central bank could scale back its stimulus measures if the economy improves. The Fed is spending $85 billion every month on buying bonds to keep borrowing costs low and boost demand.
Leucadia, which models itself on Warren Buffett's Berkshire Hathaway (BRKa.N) and owns companies ranging from real estate to mining, paid $2.76 billion in stock for the remaining 71 percent stake in Jefferies.
Shares of Leucadia were down nearly 1 percent at $27.47 in afternoon trade on the New York Stock Exchange.
(Reporting by Tanya Agrawal and Anil D'Silva in Bangalore; Editing by Sriraj Kalluvila)