Both the Dow and S&P advanced on Thursday with market pros taking a long hard look at financials – the S&P’s best performing sector.
Strength was largely due to better than expected results from Morgan Stanley . Analysts and strategists were particularly impressed with the firm’s strongtrading numbers, which came in sharp contrast to Goldman's results released earlier in the week.
"Morgan Stanley is the new Goldman Sachs," says widely followed analyst Richard Bove of Rochdale Securities. "Every one of their divisions shows an improvement, and the improvement in trading operations is especially impressive."
Considering financials have lagged the market all year, is this the catalyst bulls have been waiting for?
According to the Fast Money pros, the answer is yes – and no. More specifically, it depends on whether you’re a short-term trader or a long-term investors.
The Play For Traders
For traders Morgan results provide a point of reference, explains Fast Money trader Guy Adami.
“It’s provided a bounce you can trade around. It gives you a short term tradable low,” he explains.
Adami thinks you can trade long with a stop about 11% lower.
”And the Goldman Sachs low of $125 is also a point of reference,” he says. “These are tradable lows.”
Trader Steve Grasso agrees. “I (also) like to trade around the short bursts and daily activity in this space," he says. But rather than Morgan or Goldman, Grasso trades short term moves in Citi , JPMorgan and BofA ,” against his underlying long positions.”
The Play For Investors
If you're more of a buy and hold type investor, Guy Adami does not think Morgan Stanely results signal the all-clear.
He thinks this and other banks continue to face serious headwinds. And he reminds the desk that despite the optimism Morgan Stanely still posted a loss. (The bank reported a quarterly loss of 38 cents per share, the average Wall Street forecast was a loss of 62 cents a share, according to Thomson Reuters. (Click here to see more on Morgan Stanley earnings.)
“There’s nothing about these results that say financials are a screaming buy,” he adds. In other words, don't take these results and move broadly into financials.
Trader Patty Edwards is a little more bullish – but only a little. “If you must own a stock in this space I’d own Morgan Stanley,” she says, “but it doesn’t meet my typical criteria as a buyer.”
Ever the contrarian, trader Steve Cortes is on the other side. “I’m long Morgan Stanley against $22,” he says. “And I’m long Goldman Sachs. I think these stocks represent enormous value relative to book."