Updated from 2:32 p.m. EST with new stock prices

Financial stocks see-sawed back into the red Wednesday amid poor earnings, negative analyst research and Washington Mutual's ( WM) somber warning on the staying power of housing-market troubles.

WaMu itself took a 17.3% slide following those comments, as well as news that New York Attorney General Andrew Cuomo is expanding his probe into allegations that the company "improperly pressured appraisers to provide inflated" house-price appraisals. Cuomo has sent subpoenas to Fannie Mae ( FNM) and Freddie Mac ( FRE) for information on mortgages they bought from WaMu.

Cuomo also cautioned the mortgage investors that they "cannot afford to continue buying" WaMu mortgages "unless they are sure these loans are based on reliable and independent appraisals." Last week the A.G. announced that he had sued eAppraiseIT, a unit of First American ( FAF), over an alleged appraisal-inflation scheme with the bank.

Fannie Mae slid 10.1% to $49.79; Freddie Mac slumped 8.6% to $45.13; and First American was recently off 6.2% to $30.07.

As for WaMu's musings on the housing market, the bank predicted that the "challenging" state of affairs would drive losses at the bank well into 2008, with a fourth-quarter loan-loss provision estimated to be "similar to or slightly higher than" the previously offered outlook for $1.1 billion to $1.3 billion -- at least a 13.8% jump from third-quarter levels.

WaMu shares lost $4.19 to $20.04, which helped pummel the languishing NYSE Financial Sector and KBW Bank indices. The former recently tumbled 375.49 points, or 4.2%, to 8,544.84; the latter surrendered 0.3% to 100.86.

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