Morgan Stanley seems to be the No. 2 Wall Street firm in more ways than just size. While Goldman Sachs generally pleased investors with earnings that could be read as not too far from expectations, Morgan Stanley on Wednesday posted a far-greater-than-projected loss of $2.4 billion for its fiscal fourth quarter.

The newly christened bank holding company said sliding asset values had driven losses and pledged $2.0 billion in cost-cutting in the coming year.

The New York-based firm lost $2.34 per share for the quarter ended Nov. 30 and posted a full-year deficit of $3.6 billion, or $3.61 per share. Analysts had forecast a loss of only 34 cents per share. Total assets under management fell by 28.0% ,to $546.0 billion year over year and the bank's leverage was reduced significantly to 11.4 from 32.6 according to TradeTheNews.com.

On Tuesday, Goldman Sachs (nyse: GS - news - people ) also announced a larger-than-consensus quarterly loss, though it fell within the range of Wall Street's worst forecasts and Wall Street seemed happier with the company's prospects than it did on Wednesday with Morgan's.

Investors pushed Morgan Stanley down 3.9%, or 63 cents, to $15.50, in premarket trading. On Monday, the shares had closed at $13.64, so that’s still a good two-day gain, but the stock traded over $55 less than a year ago. Goldman, by contrast was down only 1.4% Wednesday morning, to $74.95, a $1.05 loss.

Morgan Stanley's dissapointing performance came during a quarter reversals of fortune for once hubris-filled financial industry. The bankruptcy of Lehman Brothers (nyse: LEHMQ - news - people ) and the sale of Merrill Lynch (nyse: MER - news - people ) to Bank of America (nyse: BAC - news - people ) revealed the weakness of these highly leveraged businesses. The wild swings in markets left only Goldman and Morgan as independent bulge-bracket brokerage houses.

In October, Morgan Stanley spent $23.0 billion to buy securities from money-market and similar funds it manages to cover $46.0 billion in outflows. (See "Morgan Stanley Forked Out $23B To Float Funds") Earlier in the the beleaugered firm received a $9.0 billion investment from Mitsubishi UFJ Financial Group in exchange for a 21.0% stake. (See "Morgan Stanley Can't Please Everyone.") That amount of money would now buy a little more than half of Morgan Stanley.

Financial stocks helped New York's stock indexes edge higher at the open Tuesday, despite a multibillion-dollar loss from a Wall Street heavyweight. Meanwhile, consumer prices tumbled, according to government data, and new housing construction hit record lows.

All of the morning's news comes as the Federal Reserve wraps up its two-day monetary policy meeting, which is expected to conclude with another cut to benchmark interest rates. The fed funds rate currently stands at 1.0%, but the expected cut to 0.5% would be little more than a formality, since the effective fed funds rate has been trading below that level since mid-October. The central bank's statement will be closely watched for hints toward the Fed's next move, and perhaps a further expansion of its balance sheet through purchases of Treasury bonds or agency debt.

Before the Fed took center stage, Goldman Sachs (nyse: GS - news - people ) made the morning's biggest headlines, recording the first red ink in its 10-year history as a publicly traded company. The firm booked a loss of $4.97 a share, or $2.1 billion, as revenues tumbled across most of its businesses. The news did little to shake investors' faith though, as Goldman shares started the day up $3.00, or 4.5%, to $69.46. Rival Morgan Stanley (nyse: MS - news - people ), which reports fourth-quarter results Wednesday, tacked on 47 cents, or 3.5%, to $14.11.

Shortly after the open, the Dow Jones industrial average gained 55 points, or 0.6%, to 8,619. The Standard & Poor's 500 added 9 points, or 1.1%, to 878, and the Nasdaq was up 21 points, or 1.4%, to 1,529. Volumes were light as investors treaded water before the Fed's statement.

The Labor Department said its Consumer Price Index came in at -1.7% for November, thanks in large part to cheaper oil prices. Excluding fuel and energy costs, the index was unchanged from the month before. The inflation gauge has cooled considerably since the summer, when record fuel costs sent the reading on a dizzying rise. (See "Consumer Prices Take A Dive.")

Crude oil was up 33 cents Tuesday, but still trading at just $44.84 a barrel. United States Oil Fund (nyse: USO - news - people ), an exchange-traded vehicle that tracks crude and other products, gained 84 cents, or 2.3%, to $37.68 early in the session. (See "OPEC: All Eyes On Russia.")

On the housing front, the Commerce Department recorded 625,000 housing starts in November, down 18.9% from the October estimate, and off 47.0% from November 2007. New building permits were at 616,000, down 48.1% from the year before, while housing completions were just below 1.1 million, 22.8% below the year-prior figure. But the drop in starts can be taken as a blessing in disguise, since the glut of inventory that home builders face will be helped by fewer new homes on the market.

Wall Street was due for a letdown Tuesday, after gains in nine of the past 11 sessions and a batch of shaky profit forecasts late Monday. The decline, though steep, was relatively tame though, as stocks traded within a narrow range for much of the day.

A significant portion of the action took place in the bond market, as investors sought to park their money in safer investments and ignored the prospect of minimal, or even nonexistent, returns. A $30.0 billion auction of one-month Treasury bills drew robust interest -- a bid-to-cover ratio of 4.2 -- despite a yield of 0.0%. After the auction, the bills were trading at a yield of 0.04%. Three-month T-bills were returning even less, with a yield down to 0.03%, from 0.11% Monday. (See "The Zero Percent Solution.")

The rush into bonds was set off by a day-long fade in U.S. equity markets. The Dow Jones industrial average lost 243 points, or 2.7%, to 8,691; the S&P 500 fell 21 points, or 2.3%, to 889; and the Nasdaq lost 24 points, or 1.6%, to 1,547. (See "Street Slides Back.")

Tech stocks were among the few winners, despite profit and sales warnings from semiconductor companies Texas Instruments (nyse: TXN - news - people ) and Broadcom (nasdaq: BRCM - news - people ), among others. The weaker global economy has crimped demand for their chips, leading to sharply lower fourth-quarter expectations. Texas Instruments gained 4.9%, and Broadcom added 7.0%. The Philadelphia Semiconductor Index, which tracks the pair and their fellow chip makers, rose 5.2%.

Profit-taking likely had some impact on Tuesday's broader decline, but optimism that President-elect Barack Obama's stimulus plans can spend the U.S. back into prosperity took a backseat, as certain early-cycle recovery stocks sank. Companies like FedEx (nyse: FDX - news - people ) and UPS (nyse: UPS - news - people ) are traditionally among the first to bounce back from economic downturns, but a sharply lowered forecast from FedEx Monday sapped investor hopes that such a rebound is already on its way. The parcel shipper said that although fuel pressures have eased, recessions around the world will take a heavy toll in 2009. FedEx shares lost 14.5%; UPS was down 7.0%. The Dow Jones transportation average, which counts both companies as well as airlines, railroads and trucking companies, slid 5.6%. (See "U.S. Recession To Span 2009, OECD Says.")

The rescue plan for Detroit's automotive industry appears to have paused, as lawmakers labor over the details of a proposal to lend General Motors (nyse: GM - news - people ) and Chrysler $15.0 billion of taxpayer money. A drafted plan from Democrats has been met with resistance, but congressmen still appeared confident that a bill will be passed this week. GM shares lost 4.7% Tuesday. Ford Motor (nyse: F - news - people ), which is not presently in danger of insolvency and thus not participating in this initial loan, slipped 4.4%.

Equities stumbled in New York Tuesday afternoon, surrounding their morning gains and briefly turning negative before positive momentum built up in the final hour of trading to lock in a snapback rally.

Automakers were in focus virtually from the outset, after Ford Motor (nyse: F - news - people ) revealed the viability plan it sent to Congress. According to the plan, Ford believes it can be profitable by 2011, and is only requesting a $9.0 billion emergency credit facility as hedge against prolonged pressure on the economy and U.S. consumers. Ford's survival roadmap helped set off a rally, but the gains were thwarted when figures on domestic auto sales began to trickle out.

Ford said its November sales dropped 30.6% year-over-year, while General Motors (nyse: GM - news - people ) recorded a 41.3% drop and Chrysler said sales fell 30.0%. The automakers have cited the lack of credit available to consumers for auto loans as one reason for the pain in the industry, and the impact was not felt only by Detroit's carmakers. Sharp declines in U.S. sales were also reported by Japanese automakers Toyota Motor (nyse: TM - news - people ) and Honda Motor (nyse: HMC - news - people ), which said sales fell 33.9% and 31.6%, respectively.

The afternoon fade was canceled out in the final hour of trading though, as stocks returned to their best levels of the day before the closing bell. The Dow Jones industrial average finished with a gain of 270 points, or 3.3%, to 8,419; the S&P 500 added 33 points, or 4.0%, to 849; and the Nasdaq was up 52 points, or 3.7%, to 1,450.

Late in the session, Ford was up 6.3%; American depositary receipts of Toyota 5.9%; and Honda ADRs 3.5%. GM, which perked up to a gain of 4.1% just before the close, is said to be requesting $12.0 billion from Congress, according to TradeTheNews.com. (See "What GM Will Look Like, If It Survives.")

General Electric (nyse: GE - news - people ) was the biggest winner among the blue chips, despite warning that fourth-quarter profits will come in at the low end of its forecast due to restructuring charges associated with the downsizing of GE Capital. Investors brushed aside the news to focus on GE's decision to maintain its healthy 31 cent per share dividend, which yields more than 7.0%. GE shares were up 14.3% heading toward the close. (See "First Aid For GE's Financial Arm.")

Crude oil settled at $46.96 a barrel Tuesday, losing $2.32, as worry over an extended U.S. recession combined with a skeptical view toward OPEC's ability to drive prices higher.

The president-elect introduces his economy squad. They'll be busy. Here's where to start.

Missing from the list: New Mexico Gov. Bill Richardson, who was reportedly offered the position of secretary of commerce; University of Chicago economist Austan Goolsbee, who is expected to take a slot on the Council of Economic Advisers; and Congressional Budget Office Director Peter Orszag, who has reportedly been selected as director of the president's Office of Management and Budget.

"I've sought leaders who could offer both sound judgment and fresh thinking, both a depth of experience and a wealth of bold new ideas," Obama said in a Chicago press conference. The president-elect said that all of these nominees "share my fundamental belief that we cannot have a thriving Wall Street while Main Street suffers." (Full Text: Obama's Economic Team Announcement)

Despite the impressive credentials of this group, what is more important is what they will do with the economic hand they have been dealt. Late Sunday, Uncle Sam agreed to lend troubled Citigroup (nyse: C - news - people ) an additional $20 billion from its bailout purse and to backstop $306 billion of the firm's troubled loans and securities.

Meanwhile, last week, the heads of General Motors (nyse: GM - news - people ), Chrysler and Ford Motor (nyse: F - news - people ) returned to Detroit, discouraged that they were unable to convince Congress (at least for now) of the need to direct $25 billion in bailout money their way. Aside from a late afternoon rally Friday on the news of Geithner's appointment, equity markets continue to plunge.

Obama at least has seized the moment. Over the weekend, he announced broad plans for a two-year economic stimulus plan that would create 2.5 million jobs. Initial analyses put the price tag anywhere between $500 billion and $700 billion, dwarfing the $150 billion stimulus proposal he put forth on the campaign trail.

A former executive of a New York company that ran dozens of Days Inn hotels has pleaded guilty to tax fraud and agreed to pay $105 million.

Federal prosecutors in Manhattan announced Friday that Stanley Tollman entered the plea via video link from London. The 78-year-old was immediately sentenced to one day of probation.

He agreed to pay $60.3 million in restitution to the Internal Revenue Service and $44.7 million to settle a civil forfeiture action arising from the multimillion-dollar tax evasion scheme.

Prosecutors say English courts ruled against extraditing Tollman earlier this year because of his wife's poor health.

Tollman was a principal in Tollman-Hundley Hotels, which owned and managed more than 50 Days Inn hotels nationwide.

Pamela Skaist-Levy, Penn Badgley, Blake Lively, and Gela Nash-Taylor   more photos ›

It couldn't quite compete with Tuesday night's spectacle of hipsters dancing in the streets of the East Village and Williamsburg, but yeterday's over-the-top opening of the Juicy Couture flagship on Fifth Avenue was still heavy on the feel-good factor. Founders Pamela Skaist-Levy and Gela Nash-Taylor, in matching black gowns that were part Alice in Wonderland and part Alice Cooper, served Champagne and cake amid birdcages, ballerinas, and toy soldiers on stilts. As Sarah Silverman, Blake Lively, Jennifer Jason Leigh, and Jay McInerney ran a gauntlet of male models dressed all in black save for pink peonies around their necks, the reigning queens of incongruous cool shared their secret pre-party ritual: "Drink a lot of wine." Then they ran off to greet Martha Stewart. The lovefest that ensued went something like, "Juicy loves Martha!" and, slightly deeper now, "And Martha loves Juicy!"

Breathing a collective sigh of relief that the White House went to Obama, the decidedly partisan crowd wasn't quite ready to give up talk of politics. Does Michelle Obama have icon potential? "She could wear a potato sack and pull it off," said Gina Gershon. The actress, looking fabulous in feathers, could apparently wear part of an ostrich and do the same. But can our First Lady-elect hold her own on the international stage with the likes of Carla Bruni-Sarkozy? The hostesses didn't want to take sides. "They're just so different," said Nash-Taylor. Skaist-Levy added what might be the last unknown fact about America's new first family: "They were just spotted wearing Juicy."

In this Tuesday, May 27, 2008 file photo, Jennifer Hudson attends the premiere of "Sex and the City" at Radio City Music Hall in New York. At least one of two people found shot dead Friday, Oct. 24, 2008 at a South Side Chicago home was believed to be a relative of Jennifer Hudson, and police were seeking a missing child who might also be related to the singer and Oscar-winning actress. (AP Photo/Evan Agostini)

How did it happened?

I thought she was a nice singer. I knew that she made a lot of efforts to be here.

Scary..