It's a dismal day on Wall Street for financial stocks, and Regions Financial Corp. (NYSE: RF) is no exception. The Alabama-based bank today reported an eye-popping quarterly loss of $6.22 billion, or $9.01 per share, as results were pressured by a $6 billion writedown in its banking and Treasury operations.

On an operating basis, Regions' loss of 35 cents per share exceeded the consensus estimate for a loss of 20 cents per share. Net charge-offs for the quarter soared to $796 million, compared to $107.5 million in the year-ago period. Additionally, the company confessed to "emerging stress" in its Florida-based real estate and mortgage businesses.

"Although we're encouraged by steps the government has taken to stabilize the housing market and revitalize the economy, there is no quick fix for credit quality issues currently plaguing the financial services industry," commented Dowd Ritter, RF's chairman, president and chief executive officer.

Ritter added that he doesn't expect unemployment to peak or real estate values to bottom in 2009, and he warned that bank earnings won't improve until such a trough is reached. He doesn't foresee the need to seek new capital from the government, though Regions will look for opportunities to shore up its capital position as market conditions allow.

Morgan Keegan & Co, owned by Region's Financial Corp. (NYSE: RF), fired analyst John Gwynn last month for leaking information about his calls on shares of Fairfax Financial (NYSE: FFH) prior to their publication.

This is the latest chapter in an ongoing battle that includes a lawsuit filed by Fairfax accusing Morgan Keegan, Gwynn and a group of hedge- fund managers of conspiring to short the company's stock and then profit by spreading false rumors. Mr. Gwynn has since filed a libel suit against Fairfax.

Keegan stands by the quality of Gwynn's research, with a spokeswoman telling Bloomberg that "The evidence shows that Mr. Gwynn strongly believed in the accuracy of the facts in his report. The apparent advance disclosure of coverage has no bearing on the content or accuracy of the report. We continue to believe that the lawsuit is completely without merit.''

Nevertheless, this will give the proponents of a short-selling conspiracy theory some ammunition because it demonstrates that Mr. Gwynn was perhaps less than honest and it begs the question, assuming the allegations are correct -- what was his relationship with the person or people that he leaked the information to, and what did he get in return?

If Gwynn simply gave his research to someone in advance in exchange for money, that's one thing -- unethical and deplorable, but probably not altogether uncommon. But if he was paid for producing a certain viewpoint, it has the making of a major scandal.

Of all the naked short-selling crybabies, Fairfax appears to be the one that has produced the most evidence of actual wrongdoing, and this will be an interesting case to watch.

Wachovia Corp. (NYSE: WB) shares are down some 7.5% (which is at least better than today's earlier decline of about 10%), after a Morgan Keegan analyst recommended selling the shares. The call follows Wachovia's 30.9% jump last week and comes ahead of a meeting between new chief executive Robert Steel and investors.

The analyst, Robert Patten, who rates Wachovia at Underperform, made the profit-taking call this morning. In his opinion nothing has fundamentally changed to warrant last week's price appreciation. He attributes the gains to short-covering. Wachovia is still facing more credit losses as its option adjustable-rate mortgages (option-ARMs) and commercial real estate (CRE) loans are likely to continue defaulting at an increasing rate.

The analyst also noted that he has already seen this pattern of shares running ahead of fundamentals due to CEO changes. And as long as Wachovia needs to restructure its balance sheet, the stock price hike was premature.

Makes sense to me. With investors' approval of Steel, has Wachovia's balance sheet magically improved? And what can he do to improve it so soon after taking the top job? And even though he said he wouldn't, could that include raising more capital by issuing more common shares (diluting shareholders)?

Anyone who actually had the nerves of steel it takes to play financials this past year may want to pay attention to Patten's call. Recall that Wall Street's leading financial analyst, Meredith Whitney, also downgraded WB to Underperform in July. If you choose to go against her, good luck to you!

Research in Motion (NASDAQ: RIMM) is recently up $9.14 to $109.64.

• Morgan Keegan says: "Trends still very strong; raising fiscal 2009E EPS to $2.98."
  
• RIMM is expected to report EPS after the close tonight.
  
• RIMM total option volume is heavy on 191,243 contracts trading. RIMM October option implied volatility of 49 is below a level of 87 from last night prior to EPS. RIMM average option implied volatility over the last 26-weeks is 44 according to Track Data.

SanDisk (NASDAQ: SNDK) a supplier of flash data storage card products, is recently down $0.76 to $52.43.

• SNDK is expected to report EPS on 10/18.
  
• Smith Barney-SBSH has a $71 price target on SNDK. SBSH said on 10/4 "contract pricing a negative, new products a partial offset."
  
• SNDK October option implied volatility is at 64, November is at 52, above its 26-week average of 44 according to Track Data, suggesting larger near term price risks.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: Oil and gas services companies, mining companies and Moody's Corporation (NYSE: MCO) were today's noteworthy upgrades:

• Morgan Keegan upgraded Natural Gas Services Group Inc (AMEX: NGS), Basic Energy Services Inc (NYSE: BAS) and Complete Production Services Inc (NYSE: CPX) to Outperform from Market Perform and Patterson-UTI Energy Inc (NASDAQ: PTEN) to Market Perform from Underperform, as the firm has a bullish outlook for drilling activity in the back half of 2007 and into 2008.
• JP Morgan upgraded shares of both Compania de Minas Buenaventu (NYSE: BVN) and Goldcorp Inc (NYSE: GG) to Overweight from Neutral on valuation.
• Moody's was upgraded to Overweight from Equal Weight at Morgan Stanley, citing increased confidence in revenue outlook and growth drivers.

OTHER UPGRADES:

• Inverness Medical Innovations Inc (AMEX: IMA) was upgraded to Buy from Hold at Stifel Nicolaus.
• Credit Suisse upgraded shares of Johnson Controls Inc (NYSE: JCI) to Outperform from Neutral, citing growth outlook in the company's building efficiency business.
• Allianz SE (NYSE: AZ) was upgraded to Buy from Add at WestLB on valuation and the company's strong Q1 results.