Wachovia Corporation (WB: sentiment, chart, options) has effectively captured the Street's attention following its second-quarter earnings report. While the beleaguered bank confessed to a wider-than-expected loss, the shares are nonetheless 7% higher at midday.

The stock has also been subject to some downgrades from debt-ratings firms. S&P dropped Wachovia's counterparty credit rating, as well as its long-term counterparty credit rating. Analyst Victoria Wagner said, "The downgrade reflects the higher-than-expected loss forecast in Wachovia's residential Pick-A-Pay mortgage portfolio, which will likely substantially weaken operating results in the near term." However, S&P affirmed a stable outlook.

Moody's also piled on, slashing the bank's senior debt rating, long-term deposits, and financial strength rating. The downgrades were, like S&P's, prompted by an expected increase in losses on Wachovia's $122-billion adjustable-rate mortgage (ARM) portfolio. Wachovia's huge mortgage losses have been largely attributable to the aforementioned "Pick-A-Pay" loans, which the bank inherited through its acquisition of mortgage lender Golden West Financial in 2006.

Perhaps the market is enthused about WB's cost-cutting plans; the bank said it will slash its dividend and cut 10,750 jobs in order to raise capital. Or, maybe investors are cheered by the Zen-like approach of CEO Robert Steel. In a conference call, Steel said Wachovia has no plans to issue common stock to raise capital, citing "lots of other options" available to the bank. He also added that his goal is not to monitor the stock price, but rather to run the company and let the stock price take care of itself. Sure, it's only been an hour -- but so far, his plan is working...