More Pain May Lie Ahead For WaMu

Washington Mutual is optimistic about its ability to weather the mortgage crisis, but some analysts warn it may be a bit too optimistic. After the close Tuesday, Washington Mutual (nyse: ) reported a steep profit loss in the second quarter, far worse than had been expected, as it significantly increased its loan loss reserves in response to continued declines in housing prices nationwide. Bracing themselves for bad news, investors pushed the ailing stock up 6.2%, or 34 cents, to close at $5.82. Earlier in the day, Wachovia posted a gaping $8.9 billion quarterly loss, also largely due to pain related to soured mortgages. Still, riding an industrywide rally, Wachovia (nyse: ) shares soared 27.4%, or $3.61, to close at $16.79. Both firms' share prices have been sliding since autumn, when Wachovia traded above $50 and WaMu traded... [read full story]