Morgan Stanley: Friday Earnings Winner

NEW YORK ( TheStreet) -- Morgan Stanley ( MS) was the winner among major U.S. banks on Friday, with shares rising 2.6% to close at $29.69.

The investment bank reported third-quarter earnings applicable to common shareholders of $888 million, or 44 cents a share, increasing from $803 million, or 43 cents a share in the second quarter, and a net loss of $1.047 billion, or 55 cents a share, in the third quarter of 2012, when the company recorded a $2.3 billion debit valuation adjustment (DVA).

But excluding DVA, Morgan Stanley's third-quarter revenue came to $8.1 billion, compared to $8.3 billion the previous quarter, and $7.6 billion a year earlier. That is a strong third-quarter revenue result, when considering the pressure on trading revenue reported by the company's largest competitors.

Adjusted third-quarter earnings were 50 cents a share, soundly beating the consensus estimate of 40 cents, according to Bloomberg.

" We view results favorably, representing another positive datapoint toward our positive thesis on the stock," wrote JPM Securities analyst Devin Ryan in a note on Friday. Ryan rates Morgan Stanley "market outperform," with a price target of $34.00.

Please see TheStreet's earnings coverage for much more on Morgan Stanley's strong third-quarter results.

The broad indices all rose on Friday. With the federal debt-limit and government shutdown resolved on Friday, investors turned their attention back to Federal Reserve policy. The Federal Open Market Committee last month surprised investors, with its decision not to curtail the central bank's purchases of long-term bonds, which have run at a rate $85 billion a month since September 2012.

The KBW Bank Index ( I:BKX) rose 0.4% to close at 65.52, with all but seven of the 24 index components ending with gains.

Federal Reserve Bank of Chicago president Charles Evans on Thursday said the Fed shouldn't start reducing the pace of bond buying due to disruption to economic data during the government shutdown. Dallas Fed President Richard Fisher added that political dysfunction in Washington supports the case for not tapering in the near term.

The next FOMC meeting will be held on Oct. 29-30. Saturation coverage of the next decision on the central bank's "QE3" stimulus policy will be sure to build over the next week and a half.

The broad market on Friday was also boosted by a strong earnings report from General Electric ( GE), which reported continued industrial margin expansion, a record order backlog and a very strong increase in Oil & Gas revenue. Jim Cramer on Friday said " we have to buy it because it's become and industrial company again " following the sale of its stake in NBC Universal and the transformation of GE Capital into a much leaner and more profitable unit, supporting the industrial business.

Please see TheStreet's earnings coverage for a detailed look at GE's third-quarter results, by segment.

GE's shares were up 3.5% to close at $25.50.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

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.

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