Tesla (NASDAQ:TSLA) stock is plunging lower to kick off the new trading week, although the decline is more related to macroeconomic factors rather than company-specific factors.
This fall comes despite CEO Elon Musk calling for more than $100 billion of revenue over the weekend on a Lex Fridman podcast. That’s slightly above the 2024 consensus analyst estimate for $99.44 billion and compared to $96.77 billion in 2023.
Meanwhile, 2024 hasn’t been very friendly toward electric vehicle (EV) stocks. TSLA stock is now down by about 20% year-to-date (YTD) as competition in the industry has picked up among a consumer preference for hybrids over EVs, given range and charging inconvenience fears.
TSLA Slides Lower Amid Recession Fears
With both the S&P 500 and the Nasdaq 100 solidly in the red, most stocks are seeing substantial declines today. That has opened up the door for recession fears following a weak jobs report last week. Nonfarm payrolls grew by 114,000 in July, significantly below the estimate for 185,000.
The miss was enough to trigger the Sahm Rule, which is known to signal recessions. The rule is activated “when the three-month moving average of the U.S. unemployment rate is at least a half a percentage point higher than the 12-month low.”
At the same time, Claudia Sahm — the inventor of the rule — isn’t calling for a recession just yet.
“We are not in a recession now — contrary the historical signal from the Sahm rule — but the momentum is in that direction,” wrote Sahm in an email to CNBC. “A recession is not inevitable and there is substantial scope to reduce interest rates.”
Another factor taking down stocks today is the Japanese Yen carry trade. A carry trade occurs when an investor borrows a currency with low interest rates and then uses the proceeds to invest in a currency with a higher rate.
“The now evident vulnerability of US equity prices to a rise in the Yen exchange rate warns of the consequences for US asset prices and developed-world asset prices in general from monetary policy changes in the east,” said ERIC’s Russell Napier.
With the Japanese Yen appreciating over the U.S. dollar, investors have responded by deleveraging their investments.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
