Updated from 2:42 a.m. ET with market close information.
NEW YORK (
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
hitting intraday records as
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
KBW Bank Index
was up 2% to 65.86, with all but two of the 24 index components showing afternoon gains.
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
The second-quarter results included debit valuation adjustment (DVA) of $175 million, compared to $350 million a year earlier.
Net revenue, excluding DVA, $8.3 billion in the second quarter, increasing from $6.6 billion a year earlier, as the company saw major improvements in its three main business areas.
Including DVA, Morgan Stanley's Institutional Securities saw revenue increase 30% year-over-year to $4.3 billion, while Wealth Management Revenue grew 10% year-over-year to $3.5 billion and Investment Management Revenue was up 48% to $673 million.
for more details on Morgan Stanley's industry-leading second-quarter trading results.
In a note to investors on Thursday, Atlantic Equities analyst Richard Staite wrote Morgan Stanley's "equity trading revenues increased 58% YoY and were 24% above consensus. Investment bank fees were also strong up 22% YoY and 15% above consensus." However, the analyst also pointed out that fixed income trading revenue came in 8% below analysts' expectations, even though it was up 50% year-over-year.
Morgan Stanley also announced that it would begin repurchasing $500 million in common shares.
Staite rates Morgan Stanley "underweight," with a price target of $24, writing on Friday that the company's return on tangible common equity "remains subdued," at 6.8% during the second quarter.
Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock.
-- Written by Philip van Doorn in Jupiter, Fla.
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.