Morgan Stanley shares advanced 1.8% on Friday, closing at $171.15, partially recovering from a steep 4.9% drop the previous session. The rebound coincided with the release of January consumer price data that came in cooler than economists had forecast, alleviating some pressure on the Federal Reserve to maintain restrictive monetary policy.
Market Shifts and AI Disruption Concerns
Friday's trading saw Treasury yields dip and stocks stabilize following the inflation report. According to CME's FedWatch tool, traders now see a 52.3% chance of a 25-basis-point rate cut in June, up from 48.9% prior to the data. Market strategists noted a cautious tone, with investors assessing whether the recent sell-off in large-cap technology stocks and fears of artificial intelligence disruption could spread to other sectors, including wealth management—a core business for Morgan Stanley.
"We see this as a 'prove it' year for AI," said Jack Herr, primary investment analyst at GuideStone Funds, reflecting broader market unease about which industries might face pressure from new innovations.
Regulatory and Policy Headwinds Loom
Attention now turns to upcoming catalysts that could drive volatility. The Federal Reserve will release minutes from its late-January meeting on February 18, which investors will scrutinize for clues on the timing of potential rate cuts. Simultaneously, U.S. bank regulators are nearing the release of a new draft of the "Basel endgame" rules, which would dictate stricter capital requirements for major financial institutions like Morgan Stanley, JPMorgan, and Goldman Sachs.
Stricter-than-expected rules could force banks to hold larger capital buffers, potentially limiting funds available for shareholder returns like stock buybacks. The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have already submitted their proposals to the White House for review.
Corporate Actions and Market Closure
Separately, Morgan Stanley announced it declared regular dividends for several series of preferred stock, with record dates set for February 27 and March 31. U.S. equity markets are closed Monday for the Washington's Birthday holiday and will reopen Tuesday.
