After a stellar first half to the year, especially when compared to last year's bloodbath, the S&P 500 index has been trending down since August. Friday was its third big down day in a row, and by the time markets closed for the weekend, the benchmark index was back at the same levels it was trading at in May. 

This means it's down a full 8% from July's peak, and a move like this in a broad equity index almost always means even more exaggerated moves in individual stocks. Such is the case with both Morgan Stanley (NYSE: MS) and AT&T Inc (NYSE: T), down 14% and 17%, respectively, for the year, compared to the 10% gain the S&P is still holding onto, even with the current dip.

However, there are reasons to think this underperformance is about to end, and both stocks stand to make big gains in the coming weeks. Let's jump in and see what kind of opportunities are opening up. 

Morgan Stanley

The Wall Street titan has been hurt by a run of poor earnings reports, which have raised concerns about higher-than-expected credit losses and slowing revenue growth. Coming into the end of last week, shares were down almost 25% since July and right at the same levels where the bears took them down to last year. 

But while the S&P 500 index closed at its low on Friday, Morgan Stanley shares actually managed to stay flat on the day after buyers stepped in following a dip at the open. As we noted last week, the stock's Relative Strength Index (RSI) was in the 20s, indicating extremely oversold conditions, so we've been watching for signs that momentum is shifting to the bid. With the RSI already moving up towards 40, it appears the shift has begun.  

The technical support for a fresh rally to start will be strengthened by comments from the team at Wolfe Research, who upgraded their rating on Morgan Stanley shares on Friday. They feel most, if not all, of the downside is now priced into shares, while the company's 2024 outlook is actually strengthening. This was a theme echoed by Goldman Sachs last month when they selected Morgan Stanley as one of the best banks out there. With shares already starting to bounce off multi-year support, this could well be the start of the comeback rally. 

AT&T

The telecommunications giant has been in a downtrend for a lot longer than Morgan Stanley, and so has more work to do to break it and begin a reversal. Things have been trending down since the most recent big high in 2016, with shares currently back at the same levels they were trading when Bill Clinton became president. 

While no one is expecting a move towards actual fresh highs anytime soon, just like Morgan Stanley, AT&T's RSI is moving firmly up from oversold conditions. Shares are already up 15% from July's low, and a surprisingly good earnings report last week should be enough to propel them even higher.

The company smashed analyst expectations for both revenue and earnings while management raised full-year guidance. With a price-to-earnings ratio that's still just 6, you’re going to struggle to find a mega-cap stock with both a cheaper valuation and more tailwinds than headwinds in place. 

Higher highs and higher lows have consistently been printed since July's low, which makes a compelling case for that to have been a potentially multi-year bottom. Shares popped as much as 10% in the wake of last week's report, so don't be surprised if this is the turning point. If the stock can continue to trade up and close above the $16 level for a couple of sessions, we'll have a fresh uptrend, and the comeback rally will truly have started.