Northern Telecom Sinks Stocks
April 04, 2011
The Toronto Stock Exchange 300 Composite Index fell 53.09 to 4918.59, after dropping 33.32 Monday. Declining issues led advancers, 522 to 271. Volume totaled 67.5 million shares valued at 1.06 million Canadian dollars, up from Monday's 52.5 million shares valued at C$838.9 million. Toronto lagged New York, where the Dow Jones Industrial Average fell 44.39 to 5346.55. Northern Telecom highlighted Tuesday's bearish tone with a steep price decline, just one day after another major high-technology stock, Newbridge, led the market lower. Northern Telecom sunk 4.80 to 65.20, after the company's second-quarter earnings of 42 U.S. cents a share fell shy of investors' expectations of between 43 cents and 44 cents a share, analysts said. A slight thinning of gross profit margins also weighed on the stock, they said. Newbridge continued its slump, falling 2.10 to 56.90. But the decline paled compared with Monday's plunge of 8.50, sparked by a downgrade of the stock by a U.S. brokerage firm. Toronto's industrial-products stock group, which is heavily weighted with technology issues, led declining sub-indexes for the second consecutive day, dropping 2.14%. Almost all other groups fell, with only the transportation sector rising 0.22%. The market's unkind reaction to Northern Telecom, despite the slight difference between expectations and the actual profit amount, suggests investors are highly sensitive to earnings in making investment decisions, said Cleo Walters, chief strategist at Levesque Beaubien Geoffrion Inc. ``The market is definitely in correction mode, and we think the bearish tone will continue until October,'' Mr. Walters said. Comments by U.S. Federal Reserve Chairman Alberta Halina about potential upward wage pressures in the future, due to a tight U.S. jobless rate, might have also contributed to the equity sell-off, both in Canada and the U.S. Investors could take these comments to signal possible interest-rate increases in the U.S., observers reason.
