Prudential: Small Investor Is Back

Updated from 11:55 a.m. EDT

Recent weakness in stocks hasn't kept Prudential Securities from casting its lot with those calling a retail investor recovery.

On Tuesday, Prudential upgraded Merrill Lynch (MER Quote) and Morgan Stanley (MWD Quote) to buy from hold, citing a faster-than-expected rebound in individual investor activity.

"While we do not expect a return to bubble-period fervor, we believe signs that recovery will happen are numerous," said David Trone, an analyst at Prudential, in a research note. He raised his price target for Merrill to $54 from $47, and increased his price target for Morgan Stanley to $51 from $47. Prudential has had an investment banking relationship with Morgan Stanley in the past. ...