Stock Market News: Morgan Stanley (MS) Reports Loss

Yesterday, the Federal Reserve mentioned that it would use "all available tools" to stimulate the U.S. economy. One of those tools was wielded yesterday, in the form of a 75 point Fed rate cut that brought the Fed Funds rate down to 0.25%. Indeed, this show of solidarity with Wall Street, and a willingness to do what it takes, it helping the stock market today. Even Mortgan Stanley (MS) is up today, despite posting a $2.3 billion loss.

Morgan Stanley hopeful that economy will recover

Morgan Stanley, like some of the other financials (including Goldman Sachs -- GS), is gaining on the hopes that the government will do whatever it takes to shore up banks and Wall Street in the name of economic stimulus. Indeed, since yesterday's announcement, the stock market has been enjoying a rally that MS could only marginally dampen. However, recession is here, and there is not much that can be done about it. The real trick for investors is figuring out which companies are likely to make it through -- and then invest in those.



The real question, though, is whether or not Morgan Stanley is one of those with fundamental strength right now. The Wall Street Journal is reporting that MS has been downgraded:

Moody's Investors Service responded with a one-notch downgrade of its debt ratings to A2 as it also noted "increased vulnerabilities" caused by the credit crisis. Moody's said the results "indicate erosion in certain important Morgan Stanley franchises that had previously underpinned the ratings."

This means that it is likely that gains by Morgan Stanley are merely the result of a broader stock market rally, and not really indicative of any especial strength. But, if you feel that MS will eventually recover and thrive, it might not be a bad time to add it as part of a buy and hold strategy.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.