The investment bank's loss - which was its third in as many quarters - was worse than analysts expected.
Its results were hit by repayment of government funding, with the loss increasing to around $1.3 billion with these charges included.
However, strong performances in the areas of investment grade and distressed debt trading helped offset part of the loss.
Chairman and chief executive officer John Mack admitted the bank was "not satisfied" with its performance in some areas.
"We are taking steps to deliver better results in those businesses," he stated, adding that Morgan Stanley is in the process of hiring new employees in order to recruit "key trading and investment management talent".
A number of Morgan Stanley's rivals have posted strong financial results in the past week, with JPMorgan Chase and Goldman Sachs revealing second-quarter profits.