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Why Shares of General Electric Are Falling Today

By Lou Whiteman - Mar 16, 2020 at 4:13PM

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A recession would make the company's already difficult road ahead even more complicated.

What happened

Shares of General Electric (GE 2.27%) fell another 13% on Monday, and are now down 47% in the last month, as the threat of a U.S. or global recession continues to build.

So what

General Electric has had a difficult run in recent years, plagued by market-topping acquisitions and taking on too much debt. But the company was a strong performer in 2019, giving reason for hope the worst was behind it.

GE, however, remains a work in progress, with a long turnaround ahead even if the economy remains strong. If a recession does materialize, that process is likely to take considerably longer.

Stockbroker trading online, watching charts and data analyses on multiple computer screens.

Image source: Getty Images.

There have been developments in the last few days to suggest a recession could be on the horizon. On Sunday night, the Federal Reserve slashed the benchmark federal funds rate by 100 basis points to zero, a sure sign that the Fed's internal data shows reason for worry. And the New York Fed's Empire State business conditions index fell a record 34.4 points in March to negative 21.5, well below economists' expectations for a reading of 4.8.

GE is also under pressure because some of its key businesses are tied to sectors of the economy that are getting hit particularly hard. It's aerospace business is likely to be impacted by a slump in travel demand, which has airlines grounding planes and which could eat into demand for airplane parts and new jets.

Now what

GE was a tough stock to get excited about even before the COVID-19 coronavirus pandemic, given the tough restructuring that lies ahead for the company. This new uncertainty has only made the stock riskier. There is good reason investors are heading for the exits today.

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