NEW YORK (CNN/Money) - An analyst downgrade of the banking and brokerage sector, including an investment rating cut for Morgan Stanley, could weigh down financial stocks Thursday.

In a morning note, brokerage house Merrill Lynch lowered its investment rating on the banking and brokerage sector to "market weight," citing valuation and saying that fourth-quarter earnings "likely will remain lackluster at best."

More specifically, Merrill downgraded rival Morgan Stanley (MWD: Research, Estimates) to "neutral" from "buy." Shares of the brokerage fell $1.07 to $44.72 in trading Wednesday.

The firm also downgraded DuPont Photomasks (DPMI: Research, Estimates) to "sell" from "neutral" and increased its 2003 loss estimates, citing the company's revised loss estimates, slow return to profitability and recent stock run up. Shares of the chip equipment maker fell $1.49 to $25.35 Wednesday.

Credit Suisse First Boston increased its price target on Newport (NEWP: Research, Estimates) to $13 a share from $10, saying the chip equipment maker's cash position makes it a more defensive play for a recovery in the sector. Shares of Newport fell 41 cents to $12.92 Wednesday.

J.P. Morgan initiated coverage on the Cheesecake Factory (CAKE: down $0.09 to $34.23, Research, Estimates) restaurant chain with a "neutral" rating. Shares of the eatery fell 9 cents to $34.32 Wednesday.

Lehman Bros. upgraded Wisconsin Energy (WEC: down $0.12 to $23.28, Research, Estimates) to "overweight" from "equal weight," saying it was one of the lowest risk stocks in its sector. Shares of Wisconsin Energy fell 12 cents to $23.28 Wednesday.