Financial Winners & Losers: Morgan Stanley

Sector stocks slid, as Morgan Stanley reported deep drop-offs from the year-ago quarter's profits.
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A slew of negative headlines weighed on the financial sector Wednesday, with

Morgan Stanley

(MS) - Get Report

leading the way.

The investment bank reported a nearly 60% drop in its second-quarter earnings, even after realizing a $1.43 billion pretax gain from asset sales. Morgan rebounded 1.6% to $41.24, as the results beat watered-down estimates from analysts. CFO Colm Kelleher blamed the losses on failed energy bets and a slowdown in investment banking business. Analysts voiced concern about the company's future earnings, since most of the earnings in this quarter came from asset sales. On Tuesday, rival

Goldman Sachs

(GS) - Get Report

reported a profitable quarter, only highlighting Morgan's dismal numbers even more.

The

NYSE

Financial Sector Index recently was off 66.79 to 6813.83.

MF Global

(MF)

shares collapsed 39.7% to $8, after the futures and options broker said tight credit spreads would negatively affect its first quarter results. The company said it would probably have to raise $300 million to pay off a loan and its net revenue forecast is $28 to $58 million below analyst's expectations.

Fifth Third Bank

(FITB) - Get Report

plummeted 19.9% to $10.20, after the regional bank said it will be cutting its dividend by 66% and will have to raise at least $2 billion in capital. Cincinnati-based Fifth Third has suffered 10 straight quarterly declines and expects credit losses will result in a second-quarter profit of one cent to five cents per share.

A report on the banking sector released by

Goldman Sachs

on Tuesday continued to do damage to

Wachovia

(WB) - Get Report

. The report said that the banking sector was not likely to recover until 2009 and would likely need to raise $65 billion more in capital on top of the $120 billion already raised to cover losses. Wachovia dropped to a 16-year low and was lately down 1.3% to $16.93.

Lehman Brothers

(LEH)

continued its slide as

CNBC

reported that CEO Richard Fuld would consider a sale of the company. Shares in the investment bank slid 1.4% to $24.80. Lehman has struggled recently with a management shake-up and huge losses.

Investors sold off

Bank of America

(BAC) - Get Report

as mortgage application volume fell by nearly 9%. That bit of data combined with the other gloomy forecasts conspired to pull the banking giant down. BofA dropped to $28, its lowest level since 2002, but recently was selling down 2% at $28.63.

Fellow bank

Citigroup

(C) - Get Report

received word that antitrust regulators cleared the sale of CitiStreet to

ING

for $900 million. Citigroup has been diligently shedding assets as it deals with its massive losses due to the mortgage market meltdown. The CitiStreet unit, a joint venture with

State Street

(STT) - Get Report

provided record-keeping and administrative services to retirement plans. Citi's stock was up 15 cents to $20.61.