** Brokerage Morgan Stanley upgrades US consumer finance industry outlook to "in-line" from "cautious"

** Lifts price targets by a median of 13%

** Says Ally Financial ALLY.N is the best way for consumers to profit from rate cuts, due to expected expansion of Net Interest Margin by 48 basis points by Q4 2027

** Downgraded UWM Holdings UWMC.N to "equal-weight" as MS feels the company faces valuation risks if long-term rates don't follow Fed cuts

** Brokerage expects modest recovery in loan growth in 2026, but banks remain cautious about the macroeconomic conditions

** The sector could do well if loans grow and companies return extra cash, but it’s safer to pick strong individual stocks, says Morgan Stanley

** ALLY up 10.22% YTD, including session's move, while UWMC up 3.49% YTD

(Reporting by Anuj T in Bengaluru)

((anuj.t@thomsonreuters.com))