Investors got a nice start to the week on Monday morning, as the stock market reacted favorably to some moves on the trade front over the weekend. The Trump administration tried to play up the positives of how negotiations between the U.S. and China are going, and a move from the Commerce Department to extend an exemption for Huawei signaled an easing of tensions. As of 10:40 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 259 points to 26,145. The S&P 500 (SNPINDEX:^GSPC) gained 32 points to 2,921, and the Nasdaq Composite (NASDAQINDEX:^IXIC) rose 102 points to 7,998.

Yet even though the overall market recovered somewhat, some high-profile stocks had to deal with additional bad news on top of the challenges that they've already faced. General Electric (NYSE:GE) has a prominent investor arguing that it's destined for bankruptcy, while electric utility PG&E (NYSE:PCG) is already going through bankruptcy proceedings and now has to address a flood of new potential liability related to California's wildfires over the past few years.

GE fights back against fraud claims

Shares of General Electric were down a fraction of a percent as the industrial conglomerate addressed comments alleging fraud. Last week, Harry Markopolos, who was instrumental in unearthing the Ponzi scheme that Bernie Madoff used to defraud investors for years, released a long report essentially saying that GE is "on the verge of insolvency" because of tens of billions of dollars of what he characterized as improperly hidden losses at its long-term care insurance business.

Wind turbine with GE logo in corner.

Image source: General Electric.

General Electric responded to those claims, specifically saying that it doesn't need to raise almost $30 billion in cash immediately in order to cover potential future claim liability. GE argued that it uses "rigorous testing processes, sound actuarial analysis, and the application of regulatory and accounting rules" to handle its long-term care insurance business.

GE shares initially fell on the allegations, but they rose sharply on Friday following news that CEO Larry Culp had made purchases of stock totaling about $2 million. Insider purchases are generally seen as a vote of confidence in a stock.

Yet General Electric has had to deal with plenty of controversy in recent months as efforts to strengthen the conglomerate's best businesses while restructuring weaker divisions have been slow to yield fruit. Until the company can move forward with fundamental reform, it'll be hard for GE shareholders to feel entirely confident in its future.

Claims against PG&E get the green light

Meanwhile, shares of California electric utility PG&E plunged 28%. The drop stemmed from a court ruling that essentially opened the door to direct lawsuits from victims of California wildfires for which PG&E arguably had responsibility.

The ruling dealt with a request from victims of the 2017 Tubbs fire in the counties of Sonoma and Napa. Initially, state officials had found that PG&E wasn't responsible for the Tubbs fire. But those hit by the fires disputed that finding in court and wanted a jury trial to determine whether PG&E's equipment was to blame for the blaze. The bankruptcy court agreed with the victims, allowing a jury trial to go forward.

The move came as a surprise for PG&E, and it could open up the utility to an estimated $18 billion in additional damages. With PG&E trying to come up with a plan to emerge from bankruptcy protection, the new liability will inevitably cause more problems in balancing the interests of all of the utility's creditors. Even though it looks like PG&E will still have the right to propose its own reorganization plan, investors are less certain that the utility will emerge from bankruptcy in as good a position as they had hoped.