Financial Zombies Awaken, Speculators See Life (C, AIG, FNM, FRE)

The stocks of several financial companies which have previously received substantial government assistance surged higher today as rumors swept though the markets that the government could further limit short selling on these specific stocks.

After the market closed the SEC denied that it is considering such a move.

The four main movers were Citigroup (NYSE: C), AIG (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Citigroup rose 7.3 percent, AIG rose 12.6 percent, Fannie rose 5.9 percent and Freddie rose 7.6 percent. The surge in the stocks occurred shortly after 1PM ET.

Volume on these four stocks today was enormous, accounting for roughly 15% of the consolidated volume. Citigroup traded 1.1 billion shares, AIG traded 57.6 million shares, Fannie traded 101 million shares and Freddie traded 48 million shares.

On today's action Themis Trading's Joe Saluzzi quipped, "once again, the wards of the state have woken up."

While it is easy to group these stocks together since they were all near their death bed, AIG and Citigroup have technical and other fundamental reasons to point to for today's action.

On AIG, the company has announced massive asset sales over the past week or so. AIG will generate approximately $50.7 billion from the sale of ALICO and AIA. These sales have speculators betting the company can in fact pay off the $95 billion it owes the U.S. government. Shares of AIG also traded through the 200 day SMA of $30.48 - closing at $32.77.

On Citigroup, traders are speculating the government will sell their massive 7.7 billion common share stake sooner than expected. Once the government exits, it would be considered a positive catalyst for the stock as a major overhang will be removed. Citi also recently moved above its 50 day moving average and today passed the 200 day moving average ($3.76).

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