I'll remember Tuesday's madcap trading for a long time. How often does a blue chip company report an $8.9 billion quarterly loss -- and the stock proceeds to skyrocket 27% in a single session?

Yet that's exactly what happened with Wachovia (WB). The North Carolina-based bank not only announced that eye-popping loss but also slashed its dividend for the second time this year.

Predictably (one might almost say, sensibly), the shares plunged in the market's opening minutes. But then, suddenly, investors changed their minds about the report. Maybe this is as bad as it gets, they surmised. Perhaps the job cuts (10,700 in total) announced by new CEO Robert Steel -- fitting name for a machete wielder -- will really make a dent in WB's cost structure.

And the stock soared.

I certainly wouldn't chase WB shares after Tuesday's move. It was a little too much, too soon. However, a rally of this magnitude suggests we're close to the end of the long slide in the financial stocks. There will be individual casualties in the days and weeks ahead, but the industry will survive and start to heal.

After the close Tuesday afternoon, Washington Mutual (WM), another battered lender, posted its Q2 earnings. Ugly stuff, too: a $3.3 billion loss. Yet WaMu enjoyed a nice 6% bounce during the regular session, and the rally continued in after-hours trade.

With a significantly weaker balance sheet, WM will need a lot more time to recover than Wachovia. If you sold earlier to capture a tax loss, I see no need to rush back in.

Even so, it now looks increasingly likely that WaMu will cheat the hangman.