Analyst C. Leonard Bauer, formerly of Prudential, told BloggingStocks Thursday that Wall Street's reaction to State Street was mildly surprising.

"No announcement of losses or charges by the world's largest money manager for institutions can be viewed as a positive, but I guess we'd have to put this one in the category of a relief rally for State Street," Bauer said. "With all of the subprime write-offs that have occurred, and with the billions of dollars in mortgage-backed securities being written off, a $279 million or a $600 charge looks modest, these days. That's a pretty sad commentary on the state of the [U.S.] markets, but it's the reality in this case." Bauer added that he does not own State Street shares.

Bauer cautioned that Wall Street's sentiment could change, depending on the nature of the losses and the Street's assessment of the strength of potential law suits stemming from those losses.

"From State Street's release today we can't specify the nature of the investment errors," Bauer said. "Right now, all we have is the scope or size of the problem as an initial charge to earnings."

CEO Logue underscored State Street's operating strengths: "Our business continues to be very strong, with revenue growth expected to be in excess of 30 percent in 2007 compared to 2006. We also continue to expect to exceed our ranges for operating earnings per share and return on equity," Logue said in a statement. "We remain committed to the active investment management business and have made changes to the investment teams to address the underperformance experienced in the active fixed income strategies exposed to sub-prime mortgages.