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Tesla Plunges, Market Wobbles as Musk–Trump Feud Erupts

Tesla's (TSLA) historic stock drop rattled markets Thursday. 

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The plunge followed a bitter and highly public political clash between CEO Elon Musk and President Donald Trump, triggering fears about the future of federal support for Musk’s business empire. The dispute overshadowed otherwise mixed economic news, dragging down the broader market and highlighting the growing unpredictability of an already volatile investing landscape.

Tesla Tanks: A Historic $150 Billion Loss
Tesla shares closed down 14.3% at $284.68, wiping out more than $150 billion in market capitalization—the company's largest single-day loss ever. The sharp drop not only erased nearly all post-election gains but also hammered the Nasdaq, which closed down over 0.8%, leading a broad-market pullback.

The electric vehicle maker, long viewed as a proxy for risk appetite in tech-heavy portfolios, became the single biggest drag on the S&P 500 and Nasdaq on Thursday. By the close, the S&P 500 had dropped more than 70 points from its morning high, unable to hold the 6,000 milestone, and finishing the session down over 1%.

Tesla has now fallen in four of the past five sessions and is down more than 18% year-to-date, despite nearly doubling over the past 12 months.

Musk vs. Trump: From Alliance to All-Out War
The market plunge followed an explosive political rift between Elon Musk and President Trump, marking the end of what was once a high-profile alliance.

After Musk called Trump’s signature tax-cut package a “disgusting abomination” and urged lawmakers to kill the bill, Trump hit back hard. Posting on Truth Social, the president threatened to cut off all federal contracts and subsidies to Musk’s companies: “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts.”

The threat wasn’t idle. SpaceX has received nearly $21 billion in government contracts, primarily from NASA and the Department of Defense. Tesla also benefits from federal EV tax incentives and emissions credits.

The dispute represents a sharp turn from just months ago, when Musk served as Trump’s cost-cutting czar within the now-defunct Department of Government Efficiency (DOGE). Musk’s exit from the administration has clearly soured relations. “Elon was wearing thin,” Trump told reporters. “I helped Elon a lot. I don’t know if we will anymore.”

Musk responded on X by accusing Trump of betraying core fiscal principles, resurfacing decade-old Trump tweets warning against deficits. Musk now claims Trump wouldn’t have returned to office without his backing—a claim that, in the view of some political analysts, may have some truth.

Markets Stumble as Politics Overshadow Economics
Beyond Tesla’s collapse, Thursday’s news presented a confusing mix of signals for investors.

A seemingly positive call between Trump and Chinese President Xi Jinping briefly lifted market sentiment in the morning, with both leaders pledging to resume trade talks. But that optimism faded fast as the Musk–Trump drama dominated headlines.

Meanwhile, the Department of Labor reported a jump in weekly jobless claims to the highest level in eight months. Revised Q1 productivity figures also disappointed, showing a larger-than-expected decline and a spike in labor costs. And while the European Central Bank’s long-awaited rate cut arrived as expected, it failed to lift global sentiment.

Only one sector—communication services—closed higher. Consumer discretionary names, dragged down by Tesla, were the worst performers, falling 2.5%. Costco and Brown-Forman also posted steep losses on weak sales and soft forward guidance, respectively.

Investor caution was evident heading into Friday’s jobs report, which is expected to provide key insights into the resilience of the labor market amid ongoing economic uncertainty and political crossfire in Washington.

Conclusion
Thursday’s steep losses underscore how vulnerable markets are to political shocks, particularly when they involve high-profile figures like Musk and Trump. As the two titans continue to trade blows, investors are left to weigh the fallout—not only for Tesla and SpaceX, but for broader risk sentiment. With legislative battles looming and macro data flashing mixed signals, Wall Street is bracing for more turbulence ahead.


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