Nasdaq falls on Tesla (TSLA) Sell-Off, but from high valuation

Mark Vickery February 22, 2021

BAC TSLA

Acts from $1

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The markets closed mostly lower among the major indices on this first day of a new trading week. In fact, even though the Dow closed up 29 points by the afternoon clock, it had gotten well away within daily highs up to 160 points at one point. The Nasdaq pulled off as much as 2.46% on the day – its worst single-day performance since Jan. 27, closing at a three-week low. The S&P 500 and the small cap Russell 2000 also finished in red today: -0.78% and -0.69% respectively.

There was not so much a major event that shook the markets today given the strengthening of 10-year interest rates – a 25% increase in the past month, now at 1.365% – and a new upward guide from Bank of America (BAC Free report) (which now expects + 6.5% GDP growth for the full year, which would be the strongest in 40 years). It felt more like melting snow slipping in large chunks from the roof (ask someone from Texas). We expect large financial figures along with many earnings reports this week, but will not start until tomorrow morning.

Looking at today’s sales, especially in Nasdaq, even though the volumes of sales activity were heavier than a normal profit-booking exercise, that’s probably what we’re seeing here. E.g, Tesla (TSLA Free report) fell 8.5% on the day. However, withdraw year over year and we see gains of more than 325%. If ever there was a company where a withdrawal could be expected, it’s Tesla. A great company without a doubt with a bright future ahead. But when a company has a P / E of about 200 times future earnings, there is probably some gravity.

Yes, Tesla is pushing a break on new orders for its cheaper SUV, Model Y, by $ 1000 to just under $ 40K. But this is a vehicle that has already started delivering in China, albeit at a lower price point than expected. However, the entire market for electric cars was snapped by investors today, and that is the main point here. Tesla will be fine, and so is Nasdaq. We see only a small push-pull on the daily trading activity.

We check earnings and financial results as the week progresses for a clearer indication of what we can expect from the future in the market. We also hear from Fed Chairman Jay Powell both tomorrow and Wednesday.

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