Despite being smacked with a downgrade this morning, shares of American International Group (AIG: sentiment, chart, options) have surged more than 16% heading into the close of trading. The session looked to be a wash for AIG ahead of the open, as UBS analyst Andrew Kligerman cut the shares to "neutral" from "buy." Kilgerman said that the deterioration in the credit and equity markets is "placing capital pressures on competing insurers' ability to purchase AIG assets." This development is seen as inhibiting quick asset sales and repayment of a $72-billion loan from the Federal Reserve, the UBS analyst noted.

Checking in with Zacks.com there is little room for additional downgrades for AIG. Currently, 9 of the 11 analysts following the shares rate them a "hold" or worse. Price targets are a different story, however, as Thomson Financial places the average 12-month target for AIG at $8.76 per share - a more than 300% premium to the stock's current trading range just below $2 per share.

Technically speaking, AIG has been trapped below its 10-day moving average since October 8. The stock is attempting to break out above this trendline in afternoon trading, and a rally into the end of the month by the major market indices could well push AIG past this short-term milestone.