If everything on Wall Street has gone arse-backward and pear-shaped, is it any wonder that the usual trading tenets also have reversed? A closer look at why investors are still reacting positively to the steady procession of bad news streaming from banks such as JP Morgan, Wells Fargo, Wachovia and – very possibly on Friday – Citigroup.

Investors sometimes get excited by bad news just because it isn't as bad as it could have been.

Wednesday's profit slide at J.P. Morgan Chase & Co. and Wells Fargo & Co. triggered a rally by beleaguered bank stocks. Earnings reports and comments by top executives of the two big U.S. banks included a slew of troubles -- more souring mortgages, write-downs of toxic securities and economic gloom -- but no particularly nasty new surprises for shareholders who have been pummeled by the credit crunch since summer.

It was almost as if Wachovia Corp. hadn't rattled Wall Street two days earlier by slashing its dividend and getting a $7 billion cash infusion to plug its leaky balance sheet -- or as if the rocky bank-earnings season didn't have a long way to go, including Citigroup Inc.'s results Friday.

The forecast for the banking industry has left investors feeling like they are on a seesaw, up one day and down the next. That isn't likely to end anytime soon, judging from the sobering words that came from J.P. Morgan and Wells Fargo yesterday, even as their stock prices were rising.

"Obviously, the worse a recession gets, the worse it gets for us," said James Dimon, chairman and chief executive at J.P. Morgan, the second-largest U.S. bank in stock-market value behind Bank of America Corp. After being hit hard in recent months by rising delinquencies in its $95 billion home-equity portfolio, J.P. Morgan warned its prime-mortgage business is experiencing higher charge-offs as more borrowers fail to repay their loans.

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