The declined extended the leading Wall Street firm's slide to four straight quarters.

Morgan Stanley Dean Witter & Co. said its short-term business outlook turned ''decisively negative'' after the terrorist attacks last week as financial markets absorb the impact.

While nearly all of the firm's 3,700 employees at the twin towers escaped without harm, revenues from trading and investment banking activity are likely to slow further, chief financial officer Stephen Crawford told analysts.

''It's been an enormous emotional crunch at a difficult time,'' Crawford said. ''We have seen investors be very patient, taking a wait-and-see attitude with their portfolios ... (but) it's unlikely that they will pick up until there's more clarity on the economic front.''

For the quarter ended Aug. 31, Morgan Stanley had net earnings of $705 million, or 62 cents a share, down sharply from $1.25 billion, or $1.09 a share, in the period a year ago.

Excluding a charge of $30 million for paying down debt, earnings were $735 million, or 65 cents a share, in the latest quarter.

Analysts surveyed by Thomson Financial/First Call had forecast earnings of 64 cents a share. Morgan Stanley shares were up 14 cents to $37.76 in midday trading on the New York Stock Exchange.

Revenues fell 16 percent to $5.27 billion from $6.31 billion.

The firm expects the disaster to cost in the range of $150 million, much of which will be covered by insurance, Crawford said. Many of the employees at the twin towers have been relocated, but sales to individual investors have already fallen by 20 percent since the attacks.

''Retail investors are obviously not aggressively in the market,'' Crawford said. The stock market was closed for four sessions after the attacks but reopened on Monday, and stocks have been dropping steadily ever since.

Even before the attacks, major Wall Street firm were already in a profit slide due to an extended slump in trading activity as well as mergers and acquisitions, which provide a key revenue stream for major brokerages.

---

On the Web:

http://www.morganstanley.com