Prudential upgrades brokerage companies Merrill Lynch (MER

), Morgan Stanley (MWD

), and Goldman Sachs (GS

) to buy from hold.

Analyst David Trone says the September 11 tragedy and ensuing geopolitical actions created a great deal of uncertainty; we now know more about the impact on the global economy as it could have been worse. He notes that business and consumer confidence is improving as the U.S. military/political progress has been good, and no obvious terrorist attacks have occurred since the anthrax scare.

He says his concerns about the cost side is starting to be addressed; contraction of pretax margins has halted in the fourth quarter by more aggressive than expected cost cutting. He thinks the fourth quarter represents an inflection point for revenue.