Morgan Stanley, Goldman analysts in mutual support

NEW YORK (Reuters) - The two major investment banks left standing after a financial hurricane undermined confidence in their business model advised their clients on Friday to keep buying each other's shares.

Goldman Sachs Group Inc analyst William Tanona issued a research note saying rival bank Morgan Stanley was "sound as an ongoing entity" and reiterated the stock as a "conviction buy."

Morgan Stanley analyst Patrick Pinschmidt returned the favor, saying, "We continue to believe that business model fears are overdone." He rated the stock as "overweight."

U.S. stocks soared on Friday as a series of sweeping steps to contain fallout from the credit crisis eased worries.

Shares of Morgan Stanley, pummeled earlier this week as investors fretted about the outlook for the last two remaining U.S. investment banks, jumped 22.7 percent to $27.70 by mid-morning. Shares of Goldman Sachs climbed 18 percent to $127.44.

Early Friday, U.S. securities regulators temporarily banned short sales of many financial shares.

In the note on Morgan Stanley, Tanona said that although some of the price declines this week may have been understandable, given the issues at Lehman Brothers Holdings Inc, Merrill Lynch & Co Inc and American International Group Inc, most of the downward spiral was exaggerated by short sellers.

(Reporting by Claudia Parsons; editing by Jeffrey Benkoe)