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Morgan Stanley: Trading Profit Winner (Update 1)

Updated from 2:42 a.m. ET with market close information.

NEW YORK ( TheStreet) -- Morgan Stanley (BAC) was the winner among the nation's largest financial players on Thursday, with shares rising over 4% to close at $27.70.

The broad indices all ended higher, with the Dow Jones Industrial Average (^DJI) and S&P 500 (SPX.X) hitting intraday records as Federal Reserve chairman Ben Bernanke continued his second day of congressional testimony, this time before the Senate Banking Committee. Bernanke soothed investors on Thursday, saying in testimony before the House Financial Services Committee that "a highly accommodative monetary policy will remain appropriate for the foreseeable future."

The Federal Open Market Committee's "highly accommodative" policy includes keeping the short-term federal funds rate in a range of zero to 0.25% since late 2008. The Federal Reserve has also been making monthly purchases of $85 billion in long-term bonds by the Fed since September.

The market has looked ahead to a rise in long-term rates that will result from the eventual reduction of securities purchases by the central bank, by sending the yield on 10-year U.S. Treasury bonds up considerably from the end of April, when the market yield was just 1.70%. The yield on the 10-year was 2.53% Thursday afternoon, up slightly from Wednesday.

On Thursday, Bernanke made concessions to Senators who seem never to be satisfied with large U.S. banks' capital levels. The Fed chairman said final rules to implement Basel III, along with new rules proposed last week to require the largest U.S. banks to maintain supplementary Tier 1 leverage ratios twice as high as required under Basel III should be viewed as a "floor" and not as a ceiling.

In an exchange with Senator Elizabeth Warren (D., Mass), Bernanke indicated the Federal Reserve could raise capital requirements further.

The KBW Bank Index (I:BKX) was up 2% to 65.86, with all but two of the 24 index components showing afternoon gains.

Morgan Stanley

Morgan Stanley reported second-quarter earnings from continuing operations of $1.0 billion, or 43 cents a share, compared to $562 million, or 28 cents a share, during the second quarter of 2012. Second-quarter earnings included a negative adjustment of $152 million, or 8 cents a share, on the acquisition of the firm's remaining stake in its retail brokerage joint venture with Citigroup (C).
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