Morgan Stanley set to report Q2 earnings as trading lifts rivals

Morgan Stanley is set to report second-quarter earnings Wednesday before the opening bell, with investors watching whether the bank can match the trading and investment banking momentum shown by its Wall Street rivals.

"The investment banking recovery is broadening beyond the largest players," said Sarah Lin, US equities analyst at Edgen. "Morgan Stanley's wealth management segment will be the key swing factor."

JPMorgan Chase and Goldman Sachs both reported results Tuesday that showed higher trading and investment banking revenue, signaling a sustained rebound in Wall Street dealmaking. JPMorgan's investment banking fees rose 12 percent from a year earlier, while Goldman Sachs posted a 15 percent gain in equities trading revenue.

Morgan Stanley's wealth management unit, which generates roughly half the firm's revenue, will face particular scrutiny after the division posted a slight miss on net new asset growth in the prior quarter. The bank's investment banking backlog, a leading indicator of future fee income, stood at an elevated level entering the quarter, according to the company's first-quarter disclosures.

The results come as the Federal Reserve's rate path remains uncertain, with markets pricing in two quarter-point cuts by year-end. Lower rates typically boost investment banking activity but compress net interest income on the bank's lending book. Morgan Stanley's stock has gained 18 percent year-to-date, outperforming the S&P 500's 12 percent advance, as investors bet on a sustained dealmaking recovery.

This article is for informational purposes only and does not constitute investment advice.