Credit concerns pound GE shares in volatile trade

By Scott Malone and Nick Carey

BOSTON/CHICAGO (Reuters) - General Electric Co (GE.N) shares fell as much as 16 percent on Wednesday, touching their lowest point since 1991, as investors worried about a possible downgrade of GE's credit rating and how its finance arm would get through the recession.

Shares of the U.S. conglomerate rebounded in late trading in a broad market rally, after the head of GE Capital bought more shares and a widely followed bond manager said he was "comfortable" with GE's credit.

The world's largest maker of jet engines and turbines that produce electricity told investors that it had acted aggressively to adapt to the recession and that it had no plans to raise additional equity.

The cost of insuring GE Capital's debt hit a record high on concerns over the unit, and new data showed the percentage of GE shares held short reached an all-time high on February 20.

GE shares closed down 32 cents, or 4.6 percent, at $6.69 (4.72 pounds) on the New York Stock Exchange, after touching a low of $5.87 earlier in the day.

"This looks like the same kind of bear rush that the financials got last summer," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, Ohio. "There's blood in the water, and they're going to keep pounding away on this name."

Huntington Asset Advisors holds GE shares.

Loomis Sayles' Dan Fuss, one of the most widely watched U.S. bond managers, said the company's corporate bonds were still attractive even though Moody's Investors Service is reviewing its triple-A rating on GE for possible downgrade, and Standard & Poor's has a negative outlook on the company's debt.