Stock inTesla is lower after CNBC reported that the electric-vehicle company had a firein its Fremont, Calif. plant, but the blaze probably isn’t the reason for the dip.
Fires are just a normal, albeit unfortunate, operating problem for any manufacturer. Tesla (ticker: TSLA) didn’t immediately respond to a request for comment about the fire or the damage it may have caused.
President Joe Biden is probably responsible for the share-price decline, which left the stock about 2.7% lower in premarket trading, at about $680. It has beena wild weekfor Tesla stockholders. Shares started off the week at about $675,traded above $700and fell to about $560 before bounding back, up 4.7% Thursday, to just under $700.
Nothing Tesla has done appears to be the reason for the recent volatility. It’s all about interest rates.
That is where the president comes into the picture. Thursday evening, he addressed the nation, focusing on putting Covid-19 in the rearview mirror a year after the World Health Organization declared that a pandemic had begun.
“All adult Americans will be eligible to get a vaccine no later than May 1,” said the president, adding the federal government is setting up hundreds of vaccination sites and procuring millions more vaccine doses.
It’s good news, but the market is selling off Friday morning. For stocks, the speech represents almost too much of a good thing. The economy is reopening and, as a result,bond yields are rising, putting pressure on high-growth stocks.
Futures on the Nasdaq Composite Index, home to many highflying tech stocks, are down 1.6%.Dow Jones Industrial Averagefutures, on the other hand, are flat.
Higher yields hurt richly valued, fast-growing companies more than others for a couple of reasons. One, they makes funding growth more expensive. Two, high- growth companies are expected generate most of their cash far in the future. That cash is a little less valuable in present terms when rates are high, compared with when rates are low. In a higher-rate environment, investors have more options to earn interest today, which puts pressure on high-growth stocks’ valuations.
A Friday dip, however,doesn’t mean the end of the bull market in Tesla, EV stocks or the Nasdaq. Getting the economy back on its feet is a good thing. Investors just need a chance to adjust to the changing landscape.
“There’s a good chance you, your families and friends will be able to get together in your backyard or in your neighborhood and have a cookout …and celebrate Independence Day,” Biden said. That is great news.