Tesla shares fell 3.34% on Wednesday, November 4, even as the rest of the US market rose. The stock closed at $385.19, losing $13.31 on the day. The Dow Jones index gained 3.00% the same day - its best session in 19 months.
The reason for the divergence is politics. Democrats won the Congressional elections, and investors are reassessing the risks for Elon Musk's companies. Political risk is the probability that government decisions will hit a company's business.
For a trader, this is an example of divergence within the market. Indices and an individual stock can move in opposite directions on the same day.
What numbers did the day produce?
The day's numbers. Open $379.80, range $375.50-$392.04, turnover 47.8 million shares.
- $381.30 - the price in the evening session, the stock slipped another 1.01%. The evening session is trading after the main close.
- $398.50 - what Tesla cost on Tuesday, before the election results
- $380.55 - the Wednesday morning high, down 4.5% from Tuesday
The rest of the market moved up: S&P 500 +1.58% to 7,688.62, Dow +3.00% to 53,356.12, Nasdaq +1.44%.
Why did Tesla specifically fall?
Democrats took the House and Senate. Several Republicans backed by Musk lost. There are no announced decisions on Musk's companies yet.
Investors are pricing in three possible areas of scrutiny:
- Autopilot and robotaxi. Safety rules for autopilot and robotaxi launches.
- Government contracts. Government orders from Musk's companies.
- Politics. Musk's own political activity.
What else is weighing on the stock?
Background. Texas Governor-elect Gina Hinojosa ran on a promise of a moratorium on data center construction. Barclays noted the implications for the state: Tesla's headquarters is in Austin.
- Shanghai - weak wholesale shipments after a record September
- Chief Financial Officer - sold more than 9% of his personal stake
The SpaceX question. Both companies have set up special committees to study a combination; there is no agreement. According to Bloomberg, they want to announce a deal in the first half of next year.
Barclays' calculation. In a share swap at current prices, Musk would get about 56% of the votes in the combined company with a stake of roughly 37% of the shares. SpaceX has shares with enhanced voting rights.
Kathleen Brooks of XTB warns that the new Congress will increase scrutiny of such a deal.
Where is the stock now?
Market cap around $1.52 trillion. The stock is 23% below its yearly high of $498.83; the yearly low is $297.38.
- Operating data did not change on Wednesday
- Only political risk is being repriced
Upcoming US market events are worth noting in advance in the economic calendar, and programs with access to individual stocks are easier to find via the calculator.
Watched the Dow fly while Tesla tumbled?
Such divergences within a single market are a workable story for trading stocks and indices. Beyond that, everything comes down to the rules. Some prop programs offer only index contracts, without individual stocks. Others close positions before the evening session, where Tesla lost another percent. These points are visible in the challenge terms if you read them in advance. A market filter will immediately remove programs where US stocks are not available in the terminal.