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Judging by the last few days of trading in the shares of Alcatel-Lucent (NYSE:ALU), you probably do not need me to tell you, this shift in the markets is especially bad news for this stock. ALU is down 6% off Tuesday's high of $1.58, on the relatively smaller decline of the S&P 500 Index. The stock is also not holding up well in comparison with its peer Cisco Systems (NASDAQ:CSCO) or the iShares S&P Global Telecommunications ETF (NYSEARCA:IXP). I'm suggesting that this same trend could continue based on two important points: the risk of an increasing cost of capital for a company heavily in debt; and the historical trading tendencies of ALU versus the market.

Chart forAlcatel-Lucent, S.A.

Chart at Yahoo Finance

The shift for stocks began with the testimony of Federal Reserve Chairman Bernanke Wednesday and the release of the latest Federal Open Market Committee (FOMC) meeting minutes. Concerns are heightened now that the Fed could begin to pull back quantitative easing and taper off its dovish monetary policy altogether. The trend of shares over the last several days illustrates how investors feel about the possible change in policy. But why would Alcatel-Lucent do even worse than the market and peers? After all, it's already low-priced on an absolute dollar per share basis, ignoring valuation and outlook.

If easy money policies go away, and the cost of capital rises for corporate entities, the cost also rises for Alcatel-Lucent, which needs access to capital markets to be as cheap as possible at the moment. The reason for that is because while some companies have the luxury of ending borrowing programs if costs become cumbersome, Alcatel-Lucent does not. The company had $8.67 billion in debt as of March 2013, according to Yahoo Finance and Capital IQ and the company's quarterly release. That's a substantial debt load, and considering cash flow from operating activity was negative 416 million euro last quarter, on operating cash flow of 144 million euro and after 101 million euro of interest expense, this is a company that could ill-afford higher borrowing costs.

Alcatel-Lucent's borrowing costs could be reduced if its operations improve and credit risk as measured by Moody's and Standard & Poor's is deemed reduced, but that is not the current trend. However, if the cost of capital increases across the board thanks to the Federal Reserve, with the risk-free rate pushed higher, then borrowing costs will increase for Alcatel-Lucent's U.S. debt nonetheless. That's why the Fed's rumored tapering plans are bad news for stocks and a big reason why they were down this week. But it's even worse news for Alcatel-Lucent, which has a great deal of debt and will likely continue to need it for a good while.

Finally, Alcatel-Lucent's stock action is historically cyclical, which is a point I have made about the company in the past, so I'm keeping it brief here. The stock's beta coefficient of 2.2 illustrates the tendency of ALU to exaggerate market moves. That goes for moves higher as well as lower. If this latest Fed concern continues to hold value with investors, then that bodes poorly for ALU, based on the evidence of its beta coefficient. So what is bad for stocks is worse for ALU, this time for two reasons, the threat of cost of capital increase and what its beta tells us about the stock's tendency in a down market.

Source: What's Bad For The Market Is Worse For Alcatel-Lucent