GE, Citigroup Suddenly Trade Like Twins

That is sure to be a disappointment to GE, which has worked hard to impress upon investors its focus on returning to its industrial roots.

Richard Ross, technical strategist at Auerbach Grayson, notes that the financials, which led the broad market higher during rallies this year, could now be signaling that the major U.S. equity indexes are headed lower, Ross says.

What is surprising about the selloff is that both GE and Citi, like most of the financials, actually showed improvement during their quarterly reports.

Citi showed a slight profit for the September period and has been selling off assets in its so-called bad bank, Citi Holdings. GE, meanwhile, beat Wall Street's expectations, lifted by a stronger-than expected performance in its capital division.

Still, regulatory clouds hang over both companies. Citi recently sold its profitable energy trading unit in the wake of compensation criticism, and has yet to respond to a consultant's review of top management which was generally positive but made critical comments about some of its top managers. GE, meanwhile, is expected to face tighter regulation at its capital unit, even if the spin-off that some feared is starting to look less likely.

The trading pattern broke Friday, as GE, benefitting from a pair of upgrades, was up 6.44% in mid-afternoon trading.

"We believe the risk GE Capital poses is reduced, the consensus 2010 earnings achievability is high and there is significantly more upside across the company into 2011," wrote Sanford Bernstein analyst Steven Winoker, who raised his price target to $19.

Oppenheimer analyst Chris Glynn changed his rating to "Outperform" from perform, raising his price target to $18 from $17, citing strength in the industrial business.

"Credit market conditions and uncertainty over the future of NBCU have depressed the value of GE's core portfolio to unsustainable levels, and recent share price weakness presents a favorable risk/reward scenario," he wrote.

GE is expected to sell a controlling stake in NBC Universal to Comcast Corp. (CMCSA). CNBC's David Faber reported Friday that talks between the companies remain on track, though a deal will be announced Nov. 16, not next week, as originally thought.

Citi shares were off a nickel to $4.01 in afternoon trades.

Longer term, however, the recent sell-off appears to indicate investors still have their qualms about these financial giants with their opaque balance sheets.

-- Written by Dan Freed in New York.

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