Morgan Posts Sharp Earnings Decline, Sees Little Pickup

For brokers, the song remains the same as lackluster second-quarter earnings roll in. Now investors are worrying they may be humming the same tune right through the third quarter.

Morgan Stanley Dean Witter (MWD) Thursday became the latest firm to report a sharp year-over-year decline in profits. Like so many of its counterparts, the broker is struggling with weak capital markets and a dearth of underwriting and mergers-and-acquisition deals. Worse still, Morgan Stanley offered little encouragement about the next quarter. Still, its shares jumped 7% as investors wagered that falling interest rates will fuel a rally in financial stocks.

Morgan posted second-quarter earnings of $930 million, or 82 cents a share, better than the Thomson Financial/First Call estimate of 79 cents but down sharply from the year-ago $1.46 billion, or $1.26 a share. Net revenue fell a more modest 15%, compared with the 36% drop in profits. ...