The stock market declined with high volatility yesterday. Despite positive US-China trade news, a drop in Tesla’s stock price drove the downturn.
Following a heated public dispute between CEO Elon Musk and President Trump, Tesla’s stock plummeted over 14% amidst significant trading volume. This decline marks the fourth drop in the last five trading sessions. The clash resulted in Tesla’s market capitalization shrinking by approximately $150 billion.
Musk criticized the president’s tax bill, and Trump claimed Musk was upset about lost electric vehicle tax benefits. Tesla’s stock is clearly impacted, according to Stanphyl Capital’s portfolio manager, Mark Spiegel.
“I see no meaningful fallout from this for the rest of the market, other than its slight effect on the indexes and index funds. The overall stock market has plenty of problems, but Tesla isn’t one of them.”
Reports from US and China reveal that during a Thursday phone call, Trump and the Chinese leader extended visit invitations, news that initially captivated investors.
A dispute over critical minerals recently risked dissolving a delicate trade truce between the world’s two largest economies.
“Recent market moves are further indication that with economic policy shifts, and higher geopolitical and headline sensitivity, equity markets will be characterized by greater volatility and velocity than in the previous cycle,” Katherine Bordlemay, co-head of Americas client portfolio management for fundamental equities at GSAM, stated.
The Dow Jones fell 0.25% to 42,319.74, the S&P 500 dropped 0.53% to 5,939.30, and the Nasdaq Composite decreased 0.83% to 19,298.45. Concerns about an economic slowdown due to trade uncertainties were heightened by weak US private payrolls and services data, with attention now on Friday’s nonfarm payrolls report. Initial jobless claims rose for the second consecutive week.
The comments show Schmid is likely inclined to hold the Fed policy rate steady at its June 17-18 meeting as is widely expected, but also beyond that. Federal Reserve President Jeff Schmid warned that tariffs might reignite inflation, with impacts potentially emerging soon but fully manifesting later. This suggests he favors maintaining current interest rates, aligning with expectations for the upcoming Fed meeting and possibly beyond.
Despite Trump’s calls for rate cuts, Fed Chair Powell has maintained current rates, awaiting more data due to ongoing tariff uncertainty.
US stocks surged in May, with the S&P 500 and Nasdaq seeing their largest monthly gains since November 2023 due to eased trade tensions and strong earnings. Brown-Forman’s stock dropped nearly 18% after a revenue and profit decline forecast. Procter & Gamble announced 7,000 job cuts (6% of workforce) and its shares fell 1.9%.
Trading volume on US exchanges was slightly below average at 17.3 billion shares. On the NYSE, decliners outnumbered advancers 1.11-to-1 with 253 new highs and 49 new lows. Nasdaq saw a 1.48-to-1 ratio of decliners to advancers. The S&P 500 had 16 new 52-week highs and three new lows, while Nasdaq Composite recorded 63 new highs and 42 new lows.
