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5 days ago
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Trump-Musk induced Tesla slide points to market risks from massive stocks
By Lewis Krauskopf NEW YORK (Reuters) -The rift between President Donald Trump and Tesla chief Elon Musk has captivated the world as a political drama, but it has also become a Wall Street spectacle, highlighting the risk to equity markets from the world's biggest stocks. Tesla shares slid 14% on Thursday as Musk and Trump feuded largely on social media, including the president threatening to cut off government contracts to Musk's companies. Although the stock modestly rebounded on Friday, Thursday's decline dragged down some of the most closely followed equity indexes, which are more heavily influenced by companies with the largest market values. Tesla's fall accounted for about half of Thursday's declines for both the S&P 500 and the Nasdaq 100, which fell 0.5% and 0.8% respectively, on the day. The S&P 500 is generally considered the benchmark for the U.S. stock market while the tech-heavy Nasdaq 100 is the basis for the Invesco QQQ Trust, one of the most popular exchange-traded funds. "It's a widely held stock," said Robert Pavlik, senior portfolio manager at Dakota Wealth. "When this big-name company that represents a sizable portion of the index sells off, it has an overall effect on the index, but it also has a psychological effect on investors." Tesla's decline points to the risk that many investors have long warned about, of indexes being heavily influenced by a handful of megacap stocks. Tesla is the smallest by market value of a group of massive tech and growth companies known as the "Magnificent Seven," which overall drove equity index gains in 2023 and 2024. The group has had a rockier 2025 so far, but more recently has been rebounding. The Magnificent Seven, which include Apple, Microsoft and Nvidia, had a combined weight of nearly one-third in the S&P 500 overall as of Thursday's close. "If you're an investor and you own the S&P or the Nasdaq 100 ... you just need to be aware that you own a lot of exposure to a very small cohort of names," said Todd Sohn, ETF and technical strategist at Strategas. Tesla's decline on Thursday knocked about $150 billion off its market value, while its weights in the S&P 500 and Nasdaq 100 stood at 1.6% and 2.6%, respectively. Tesla shares rebounded somewhat on Friday, up about 5% in mid-day trade, putting its market value around $970 billion. Microsoft and Nvidia, whose market values exceed $3 trillion, held weights of 6.9% and 6.8% in the S&P 500 as of Thursday. Tesla shares are down some 37% since mid-December, a period that has seen the S&P 500 fall about 1%, meaning its influence in the index has also declined over that time. The shares hold a broad influence among ETFs. Tesla has a varying presence in about 10% of the total universe of about 4,200 ETFs, according to Sohn. Those include the Consumer Discretionary Select Sector SPDR Fund, which sank 2.5% on Thursday, and the Roundhill Magnificent Seven ETF, which dropped 2.6%. "It's very important to know holistically what is in all your ETFs, because a lot of them are overlapping," Sohn said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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5 days ago
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Trump-Musk induced Tesla slide points to market risks from massive stocks
By Lewis Krauskopf NEW YORK (Reuters) -The rift between President Donald Trump and Tesla chief Elon Musk has captivated the world as a political drama, but it has also become a Wall Street spectacle, highlighting the risk to equity markets from the world's biggest stocks. Tesla shares slid 14% on Thursday as Musk and Trump feuded largely on social media, including the president threatening to cut off government contracts to Musk's companies. Although the stock modestly rebounded on Friday, Thursday's decline dragged down some of the most closely followed equity indexes, which are more heavily influenced by companies with the largest market values. Tesla's fall accounted for about half of Thursday's declines for both the S&P 500 and the Nasdaq 100, which fell 0.5% and 0.8% respectively, on the day. The S&P 500 is generally considered the benchmark for the U.S. stock market while the tech-heavy Nasdaq 100 is the basis for the Invesco QQQ Trust, one of the most popular exchange-traded funds. "It's a widely held stock," said Robert Pavlik, senior portfolio manager at Dakota Wealth. "When this big-name company that represents a sizable portion of the index sells off, it has an overall effect on the index, but it also has a psychological effect on investors." Tesla's decline points to the risk that many investors have long warned about, of indexes being heavily influenced by a handful of megacap stocks. Tesla is the smallest by market value of a group of massive tech and growth companies known as the "Magnificent Seven," which overall drove equity index gains in 2023 and 2024. The group has had a rockier 2025 so far, but more recently has been rebounding. The Magnificent Seven, which include Apple, Microsoft and Nvidia, had a combined weight of nearly one-third in the S&P 500 overall as of Thursday's close. "If you're an investor and you own the S&P or the Nasdaq 100 ... you just need to be aware that you own a lot of exposure to a very small cohort of names," said Todd Sohn, ETF and technical strategist at Strategas. Tesla's decline on Thursday knocked about $150 billion off its market value, while its weights in the S&P 500 and Nasdaq 100 stood at 1.6% and 2.6%, respectively. Tesla shares rebounded somewhat on Friday, up about 5% in mid-day trade, putting its market value around $970 billion. Microsoft and Nvidia, whose market values exceed $3 trillion, held weights of 6.9% and 6.8% in the S&P 500 as of Thursday. Tesla shares are down some 37% since mid-December, a period that has seen the S&P 500 fall about 1%, meaning its influence in the index has also declined over that time. The shares hold a broad influence among ETFs. Tesla has a varying presence in about 10% of the total universe of about 4,200 ETFs, according to Sohn. Those include the Consumer Discretionary Select Sector SPDR Fund, which sank 2.5% on Thursday, and the Roundhill Magnificent Seven ETF, which dropped 2.6%. "It's very important to know holistically what is in all your ETFs, because a lot of them are overlapping," Sohn said.
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6 days ago
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US stocks edge toward records with inflation data, policy progress in focus
By Lewis Krauskopf NEW YORK (Reuters) -The U.S. stock rebound has driven key indexes to the cusp of record levels, with fresh economic data and trade and fiscal policy developments set to test whether equities will get an extra push higher in the near term. A monthly U.S. inflation report headlines the events for markets in the coming week. Equities have bounced back from a steep fall in April, sparked by concerns about the economic fallout from President Donald Trump's tariff plans. Stocks hit a speed bump on Thursday as a public rift between Trump and Tesla chief Elon Musk sent shares of the electric vehicle maker down 14%. The benchmark S&P 500 ended on Thursday just over 3% off its record closing high from February. It closed down 0.5% on the day as Tesla's tumble offset news of progress in tariff talks between Trump and Chinese President Xi Jinping. "I'd still say it's a cautious tone" in the market, said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Despite a "recovery off the lows, I still think it's a market that is looking for greater clarity." Some uncertainty stems from how the U.S. economy is weathering the shifting trade backdrop. Trump has eased back on some of the harshest tariffs since his April 2 "Liberation Day" announcement sent stocks tumbling, but investors are waiting to see how other levies may be rippling through the economy. The consumer price index report for May, due on Wednesday, could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation. "Consumers are feeling the impact of higher prices and if there are indications that near-term inflation could re-accelerate, that is going to put further pressure on discretionary spending and ultimately could lead to a more pronounced slowdown in growth," Baird said. The CPI report will be one of the last key pieces of data before the Federal Reserve's June 17-18 meeting. The U.S. central bank is widely expected to hold interest rates steady at that meeting, but traders are pricing in about two 25-basis point cuts by the end of the year. "If we see inflationary data that defies what people are concerned about based on this tariff talk and it comes in cooler, then that could also be a catalyst to at least test those old highs," said Jay Woods, chief global strategist at Freedom Capital Markets. For the year, the S&P 500 is up about 1%. But the index has stormed back over 19% since April 8, at the depth of the stock market's plunge on concerns over the tariff fallout. Investors also are grappling with uncertainty over a sweeping tax-cut and spending bill under review in the U.S. Senate. Wall Street is monitoring how much the legislation could stimulate economic growth, but also inflate the country's debt burden as widening fiscal deficits have become a central concern for markets in recent weeks. "As debt increases, it has a greater negative impact on growth," said Kristina Hooper, chief market strategist at Man Group. The legislation also appeared to be the source of a severe rift between Trump and Musk, who had been his strong ally. Musk called the bill at the heart of Trump's agenda a "disgusting abomination," while Trump said he was "disappointed" by the billionaire's public opposition. Trade talks also remain at the forefront of markets, with a 90-day pause on a wide array of Trump's tariffs set to end on July 8. "When it comes to policy from Washington, D.C., there are still big question marks," said Bob Doll, chief investment office at Crossmark Global Investments. Sign in to access your portfolio
Yahoo
6 days ago
- Business
- Yahoo
US stocks edge toward records with inflation data, policy progress in focus
By Lewis Krauskopf NEW YORK (Reuters) -The U.S. stock rebound has driven key indexes to the cusp of record levels, with fresh economic data and trade and fiscal policy developments set to test whether equities will get an extra push higher in the near term. A monthly U.S. inflation report headlines the events for markets in the coming week. Equities have bounced back from a steep fall in April, sparked by concerns about the economic fallout from President Donald Trump's tariff plans. Stocks hit a speed bump on Thursday as a public rift between Trump and Tesla chief Elon Musk sent shares of the electric vehicle maker down 14%. The benchmark S&P 500 ended on Thursday just over 3% off its record closing high from February. It closed down 0.5% on the day as Tesla's tumble offset news of progress in tariff talks between Trump and Chinese President Xi Jinping. "I'd still say it's a cautious tone" in the market, said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Despite a "recovery off the lows, I still think it's a market that is looking for greater clarity." Some uncertainty stems from how the U.S. economy is weathering the shifting trade backdrop. Trump has eased back on some of the harshest tariffs since his April 2 "Liberation Day" announcement sent stocks tumbling, but investors are waiting to see how other levies may be rippling through the economy. The consumer price index report for May, due on Wednesday, could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation. "Consumers are feeling the impact of higher prices and if there are indications that near-term inflation could re-accelerate, that is going to put further pressure on discretionary spending and ultimately could lead to a more pronounced slowdown in growth," Baird said. The CPI report will be one of the last key pieces of data before the Federal Reserve's June 17-18 meeting. The U.S. central bank is widely expected to hold interest rates steady at that meeting, but traders are pricing in about two 25-basis point cuts by the end of the year. "If we see inflationary data that defies what people are concerned about based on this tariff talk and it comes in cooler, then that could also be a catalyst to at least test those old highs," said Jay Woods, chief global strategist at Freedom Capital Markets. For the year, the S&P 500 is up about 1%. But the index has stormed back over 19% since April 8, at the depth of the stock market's plunge on concerns over the tariff fallout. Investors also are grappling with uncertainty over a sweeping tax-cut and spending bill under review in the U.S. Senate. Wall Street is monitoring how much the legislation could stimulate economic growth, but also inflate the country's debt burden as widening fiscal deficits have become a central concern for markets in recent weeks. "As debt increases, it has a greater negative impact on growth," said Kristina Hooper, chief market strategist at Man Group. The legislation also appeared to be the source of a severe rift between Trump and Musk, who had been his strong ally. Musk called the bill at the heart of Trump's agenda a "disgusting abomination," while Trump said he was "disappointed" by the billionaire's public opposition. Trade talks also remain at the forefront of markets, with a 90-day pause on a wide array of Trump's tariffs set to end on July 8. "When it comes to policy from Washington, D.C., there are still big question marks," said Bob Doll, chief investment office at Crossmark Global Investments. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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7 days ago
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Analysis-US stocks heal from tariff pain but trade news to keep markets edgy
By Lewis Krauskopf NEW YORK (Reuters) -After months of Wall Street gyrations to the twists and turns of U.S. trade policy, signs suggest stock investors are becoming more resilient to developments and cautiously defaulting to optimism that they have weathered the worst of the tariff-related shocks. U.S. equities have edged higher over the past two weeks as they digest a sharp rally that has brought the benchmark S&P 500 within 3% of its February record high, fueled in part by easing fears about the economic fallout from tariffs. A case in point: stocks ended Monday's session higher even as markets had grappled with President Donald Trump's announcement of doubling steel tariffs to 50%. Trump's stunning "Liberation Day" tariff announcement on April 2 sent stocks plunging and set off some of the most extreme market swings since the onset of the COVID-19 pandemic five years ago. Since then, volatility measures have moderated considerably, and, with the market's rebound, there are signs that technical damage from the slide has healed. Still, investors are mindful that markets remain susceptible to daily swings stemming from negotiations between the U.S. and trading partners as key deadlines near in coming weeks, with elevated valuations making stocks more vulnerable to disappointments. "What has allowed this almost full recovery in the stock market hinges on the negotiations that are now under way," said Angelo Kourkafas, senior investment strategist at Edward Jones. "Markets, consumers and businesses have vested interest that we get clarity sooner than later," Kourkafas said. "So potentially it's going to be a critical summer that is going to test the market's momentum." After falling to the brink of confirming a bear market on April 8, the S&P 500 has surged back nearly 20% and erased its losses for the year. Near the halfway mark of 2025, the index is now up 1.5%. While Trump's tariffs remain a risk, the market no longer is perceiving them as "this big outlier event," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "We went through a period where the only thing that mattered for the markets was tariffs," Lerner said. "And now we are in a period where tariffs still matter, but they are not the only thing that matters." Truist is among the firms becoming more upbeat on the outlook for equities, with RBC Capital Markets and Barclays this week lifting their year-end targets for the S&P 500. Deutsche Bank strategists this week boosted their year-end target to 6,550, about 10% above current levels, as they cited a less severe expected tariffs hit to corporate profits. The strategists noted they expect the rally to be "punctuated by sharp pullbacks on repeated cycles of escalation and de-escalation on trade policy." Several investors and strategists pointed to a "base case" on Wall Street emerging for Trump's tariffs - 10% broadly, 30% on China along with some specific sectoral levies. The market "started saying the worst is behind us in terms of this whole tariff discussion," said King Lip, chief strategist at BakerAvenue Wealth Management. "The U.S. and China still have a lot of things to work out, but likely the worst is behind us." MODERATING VOLATILITY Volatility measures indicate calming fears about trade. The Cboe Volatility Index, an options-based measure of investor anxiety, reached 52.33 in early April, its highest closing level in five years, but has steadily receded and hovered at 17.6 on Wednesday, around its long-term median. In another sign, the average daily range of the S&P 500 has fallen to about 75 points, on a 10-session basis, about one-third the size from April during the height of post-Liberation Day volatility. Meanwhile, the S&P 500 has traded above its 200-day moving average - a closely watched trend-line - for about three weeks. The percentage of S&P 500 stocks trading in some form of an uptrend has jumped from 29.4% at the April 8 low to 60% as of last week, said Adam Turnquist, chief technical strategist for LPL Financial. "There is a growing list of technical evidence that suggests this recovery is real," Turnquist said in a note this week. Options data also suggests growing bullishness. Over the last month, on average about 0.84 S&P 500 call options traded daily against every put contract traded, the most this measure of sentiment has favored call contracts in at least the last four years, according to a Reuters analysis of data from options analytics firm Trade Alert. Calls confer the right to buy stocks at a specific price and future date, while puts grant the right to sell shares. To be sure, some investors warn the threat of tariff disruptions is not going away anytime soon and are wary of market complacency. "There is still just so much uncertainty," said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management. Indeed, talk of the acronym "TACO" - Trump Always Chickens Out - has spread on Wall Street as a rationale for why markets should not fear harsh tariffs because many believe they will likely be walked back. But some investors are worried about a backlash from the president. BCA Research strategists said they were wary of "relying on a TACO backstop." "Trade tensions may have peaked, but we are unwilling to assume they won't sporadically rise from current levels," BCA said in a note this week. Stock valuations also continue to swell, with the S&P 500's forward price-to-earnings ratio reaching 21.7, its highest level since late February and well above its long-term average of 15.8, according to LSEG Datastream. Stocks are at "a more vulnerable level," said Chuck Carlson, chief executive officer at Horizon Investment Services. "The market is probably going to be a little bit more sensitive to what it perceives as negative news."
