VTSS may be caught in the downdraft here:
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TELECOMMUNICATION STOCKS. News that highly followed Alcatel Alsthom (ALA 31 5/16 delayed) is having performance problems has hit telecommunications stocks hard this morning. While shares of French concern ALA have yet to open in the US, its stock fell in the Paris bourse by 30% following the earnings warning announcement. Shortly thereafter, trading was halted. Hence, when its ADRs open here in the US, expect a similar price hair cut to take place. Already the repercussions of the earnings warning are being felt by other suppliers of telecommunications equipment this morning as Lucent Technologies (LU 72 1/4 -4 1/8), Ericsson (ERICY 18 5/8 -1 5/16), Motorola (MOT 46 3/16 -1 1/16), and Nokia (NOK/A 74 13/16 -6 1/2) are all trading lower on the news. Given that Lucent is scheduled to meet with analysts later today and provide investors with an updated outlook on the current business environment, the hopes were that Lucent would relay positive news. However, given the fragility of the market psyche, most now expect the company to release dire news. Of course, the company is likely to release news that are not as bad as what is currently being priced into the stock. In fact, the news may be quite positive. But it is difficult to be positive when an overwhelming market rout is taking place as few investors have the courage to stand in front of a speeding freight train. Nonetheless, while the warning by Alcatel bodes poorly for telecommunication equipment makers, the planned update that Lucent is expected to provide later today may not be as bad as is being reflected in its stock price today. |
