Elon Musk Takes Big Hit After Treasury Secretary's Blunt 'Detox' Message
The Tesla CEO has been running his electric vehicle company "with great difficulty" since joining the Trump administration.
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Shares of Tesla TSLA were rocked on Monday, as markets continued to absorb Friday’s comments by Treasury Secretary Scott Bessent.
Bessent, a Yale graduate and a former hedge fund manager for Key Square Group, seemed to suggest the U.S. economy is entering a cooling-off period.
In a Friday appearance on CNBC’s Squawk Box, Bessent said, “The market and the economy have become hooked, become addicted, to excess government spending, and there’s going to be a detox period."
Stocks dropped sharply in response to that comment, but rebounded before Friday’s close. By Monday morning, that rebound was long forgotten.
The S&P 500 dropped by 2.7%, and lost touch with a key indicator in the process. The large-cap index closed firmly below its 200-day moving average (red) for the first time since November 2023.
Perhaps the most discouraging point about the market’s decline is that there are still no signs of capitulation. That would appear in the form of a dramatic increase in volume. Traders who are looking for climactic volume on this selloff have yet to find it (shaded area above), a clue that the selling may not be over.
Meanwhile, Tesla had its worst trading day in over four years, falling 15.4%. The stock has now lost all its post-election gains.
Since Tesla CEO Elon Musk assumed a highly-visible role in the Trump administration, there have been sporadic reports of protest at Tesla dealerships, including vandalism and violence.
In a Fox Business interview with Larry Kudlow on Monday, a seemingly troubled Musk admitted that, due to his responsibilities at DOGE, he was running his businesses "with great difficulty."
While the major indexes didn’t experience a sharp increase in volume on Monday, shares of Tesla did (shaded area above). It was the highest volume day for the Austin, Texas-based company since November 2024.
Tesla has lost nearly 55% since reaching an all-time high on December 17, 2024 (point B above). The stock has essentially performed a round-trip back to its launch point, marked by an earnings report in October 2024 (point A above).
Could this mean Tesla shares are due for a bounce? It’s possible. Not only did the stock experience a pickup in volume, but shares have now fallen to an area of support.
That said, I wouldn’t be a buyer of Tesla right now. In a market that’s absorbed some heavy blows in recent weeks, Tesla is among the hardest hit.
It’s better to wait for market stabilization than to try to pick the bottom. With no sign of capitulation for the broader market, catching a falling knife is a risky proposition.
At the time of publication, Ponsi had no positions in any securities mentioned.
