What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 3.3% in the afternoon session after the company unveiled a more affordable, stripped-down version of its Model Y, which disappointed investors who had hoped for an entirely new vehicle.
The move followed a 5.5% gain in the previous trading session, which was fueled by speculation over a teased product launch. However, the reveal of cheaper versions of the Model Y and Model 3, priced at $39,990 and $36,990 respectively, was met with less enthusiasm. The new variants were seen as a move to revive demand after the expiration of a $7,500 federal EV tax credit at the end of September.
Also, a confluence of negative economic data pointed to a weak economy. The latest Survey of Consumer Expectations from the New York Fed revealed that households' short-term inflation expectations are rising, while their outlook on the labor market is deteriorating. Consumers expressed greater concern about potential job losses and expect lower earnings growth, factors that directly impact discretionary spending.
Adding to the unease, Chief Economist at Moody's Analytics, Mark Zandi, warned that 22 states are already showing clear signs of a recession, placing the broader U.S. economy in a precarious position. The ongoing U.S. government shutdown further dampens sentiment, threatening to weigh on incomes and purchasing power.
The shares closed the day at $432.92, down 4.5% from previous close.
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What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was a day ago when the stock gained 3.9% on the news that the company teased an event scheduled for October 7, sparking investor speculation about the potential unveiling of a new, more affordable electric vehicle. The tease appeared in a short video posted on social media, showing a vehicle's headlights in a dark setting, fueling anticipation for the announcement. Analysts speculated that Tesla might unveil a lower-cost version of its Model Y, which was viewed as a pivotal move to sustain sales momentum amid rising competition.
Tesla is up 14.4% since the beginning of the year, but at $433.91 per share, it is still trading 9.6% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $3,061.
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