Morgan Stanley (MS) is a global financial services firm that is engaged in four distinct business areas: investment banking, sales & trading, wealth management for high net worth individuals and asset management. It competes with other global financial services firms like Goldman Sachs (GS), Citigroup (C), UBS (UBS) and Credit Suisse (CS).

Bank earnings are coming in mixed. A few days ago, JPMorgan Chase (JPM) reported its profit was up 47%. Then, Goldman Sachs (GS) reported earnings were down 52%. And on Wednesday, we got a stellar performance by Morgan Stanley (MS).

The Wall Street Journal reports that Morgan Stanley's profits were up 35% to $867 million, up from $460 million a year ago. Earnings jumped to 41 cents per share from 29 cents per share. Net revenue jumped 14% to $7.81 billion. Analysts at Thomson Reuters had forecast earnings of 35 cents a share on $7.35 billion.

As equity markets return and investors warm up to the risk trade, it looks like IPOs are poised for a strong 2011, especially in the tech sector. For example, according to a New York Times report, it looks like Groupon is in the process of talking to various Wall Street bankers to prep for a public offering.

Founded just a couple years ago, the company has grown like a weed. The website provides daily deals, which are at steep discounts. But Groupon actually gets half of the cut. Yes, it's a lucrative business as revenues reached $1 billion last year. Already Groupon is in 35 countries.

Analyst Upgrades

• NYSE Euronex (NYX) to conviction buy from neutral at Goldman.
• General Dynamics (GD) to buy from hold at Citigroup.
• Deere (DE), Parker-Hannifin (PH) and ExlService (EXLS) to overweight from neutral at JPMorgan.
• Aflac (AFL) to outperform from market perform at FBR Capital.
• Wynn Resorts (WYNN) to buy from neutral at Janney Capital.
• Amdocs (DOX) to buy from neutral at UBS.
• Juniper (JNPR) to buy from hold at ThinkEquity.
• Rudolph Tech (RTEC) and KLA-Tencor (KLAC) to perform from underperform at Oppenheimer.
• Hershey (HSY) and Pinnacle Entertainment (PNK) to outperform from market perform at Wells Fargo.
• Spirit AeroSystems (SPR) to equal weight from underweight at Morgan Stanley.
• Micron (MU) to outperform from neutral at RW Baird.

The general feeling of investors right now is that we are at a potential turning point in the economy. The final piece of the economic puzzle is for the jobs market to start showing strong gains and the final piece of the puzzle for the stock market is for financial stocks to stage a big and sustainable rally. We might be right on the precipice of both of those things happening. Investors still have an opportunity, however, to get in on the ground floor in a number of names.

The most compelling name in this space could be Morgan Stanley (MS), which has found itself on the back burner this year, particularly compared to Goldman Sachs (GS). While both stocks have struggled in 2010, GS is going to finish the year on a high note. In the last six months, the shares have risen nearly 21% compared to a gain for MS of under 1%.

Fear gripped Wall Street on September 29, 2008, when the U.S. House of Representatives failed to pass the bailout package. On that day alone, banks borrowed a record $155.8 billion.

The Fed had set up a lending facility called the Primary Dealer Credit Facility (PDCF) to lend money to banks. As the crisis spread, borrowing increased almost daily. The Wall Street Journal (subscription required) lists day-by-day borrowings:

Banks could face another mortgage crisis, according to Barron's, if they are forced to buy back subprime, Alt-A and options adjusted home mortgage securities they've sold prior to the financial crisis, mostly as mortgage-backed securities. Already some buyers, like Fannie Mae (FNMA) and Freddie Mac (FMCC), have enjoyed some success returning defective mortgages. And this could be just the beginning.

The banks, of course, are fighting vigorously to fend off these demands. As usual, the courts will have to settle the matter. The focus of the debate seems to be founded on the issue of representations and warranties that may or may not have been violated.

There are no surprises among the 11 banks mentioned. It is the conspicuous absence of names you might expect to find that is.

Analyst Upgrades

• Piper Jaffray upgraded Salesforce.com (CRM) to overweight from neutral, citing valuation following the recent sell-off and strong business trends. The firm has a $115 price target for shares.
• Keefe Bruyette upgraded M&T Bank (MTB) to market perform from underperform on valuation after AIB sold its stake in the company. The firm has a $72 price target for shares.
• Jefferies upgraded OGE Energy (OGE) to buy from hold following the announcement that ArcLight will purchase 9.9% of OGE's interest in Enogex for $183M and believes this deal highlights the hidden value associated with Enogex. The firm raised its price target to $51.50 from $43.
• Thomas & Betts (TNB) was upgraded to outperform from perform at Oppenheimer.
• Bayer (BAYRY) was upgraded to buy from neutral at UBS.
• Texas Roadhouse (TXRH) was upgraded to outperform from neutral at Baird.

Analyst Upgrades

• Deutsche Bank upgraded Illinois Tool Works (ITW) to buy from hold, citing valuation and the company's strong revenue performance. The firm has a $60 price target for shares.
• Goldman upgraded PPD Inc. (PPDI) to buy from hold and raised its price target to $31 from $28. The firm expects strong top line growth and bookings momentum for the upgrade.
• Stifel Nicolaus upgraded Insituform Technologies (INSU) to buy from hold based on higher estimates for sewer rehab and energy. The firm has a $31 target on the stock.
• Patterson-UTI Energy (PTEN) was upgraded to overweight from equal weight at Morgan Stanley.
• Wisconsin Energy (WEC) and Northeast Utilities (NU) were upgraded to buy from neutral at UBS.
• Rockwell Collins (COL) was upgraded to buy from neutral at BofA/Merrill.

Analyst Upgrades

• FBR Capital upgraded Halliburton (HAL) to outperform from market perform as it sees less headline risk from the Gulf of Mexico spill following Wednesday's House Energy and Commerce Committee hearing. The firm upped its target for shares to $44 from $35.
• FBR Capital also upgraded Morgan Stanley (MS) to outperform from market perform as it views the valuation as attractive following the recent pullback in shares. The firm maintains a $35 price target for shares.
• Deutsche Bank upgraded Avnet (AVT) to buy from hold on valuation; it views the recent pullback as a buying opportunity. The firm raised its target for shares to $39 from $36.
• U.S. Steel (X) was upgraded to conviction buy from buy at Goldman.
• News Corp. (NWS) was upgraded to buy from hold at Argus.
• Sprint (S) was upgraded to outperform from market perform at Raymond James.