US stocks fell on Thursday as escalating tensions between President Trump and Tesla CEO Elon Musk overshadowed investor optimism regarding US-China relations. The Dow Jones Industrial Average fell nearly 0.3%, the S&P 500 was down more than 0.5%, and the tech-heavy Nasdaq Composite slid over 0.8%. The conflict between Trump and Musk intensified after days of Musk-led criticism of Trump’s tax-and-spending bill, leading Trump to declare, “the easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts.” Tesla stock closed down by more than 14% following Trump’s apparent threat to Musk’s businesses.
Earlier on Thursday, Trump confirmed a phone call with China’s Xi Jinping. Trump wrote on social media that the call lasted approximately one and a half hours and was very positive for both countries. “Our respective teams will be meeting shortly at a location to be determined,” Trump added.
In economic news, data released Thursday showed weekly claims for unemployment benefits hit their highest level in eight months during the final full week of May. The tally of continuing claims remained near the highest level in nearly four years, indicating a slowing US labor market. Investors now await Friday’s release of the monthly jobs report, which economists say will offer the first real look at how the labor market is faring under the rapidly changing trade environment.
In the corporate sector, Tesla’s stock took a major hit.
Tesla stock decline amidst tensions
Following Trump’s comment about ending subsidies and contracts for Musk’s businesses, Tesla stock suffered a historic single-day market cap loss, trading at approximately $284 per share.
Elsewhere, mortgage rates eased for the first time in a month, following a significant move lower in Treasury yields. At around 6.9%, relatively high rates have depressed mortgage and homebuying activity. Shares of Palantir slid 5% in afternoon trading after reports that Republican privacy advocates in Congress are criticizing the Trump administration’s collaboration with the defense technology company over data privacy concerns.
The S&P 500 approached 6,000 for the first time since February, boosted by Trump’s positive phone call with Xi Jinping about trade, which sparked a market rally. Additionally, Trump Media and Technology took steps to launch a publicly traded crypto investment product, filing for a Bitcoin ETF with the US Securities and Exchange Commission. This move signifies a deepening involvement in the cryptocurrency space.
President Trump also emphasized the progress of talks with Xi Jinping, highlighting the complexity of rare earth minerals, crucial for manufacturing, as a pivotal issue in US-China trade relations. Shares of Amazon rose by as much as 2% on Thursday morning, benefiting from positive sentiment following the Trump-Xi call. The company sources many of its products from China and stood to gain from an improved trade relationship.
Overall, the stock market experienced fluctuations influenced by both geopolitical tensions and domestic economic indicators, reflecting the delicate balance investors must navigate in the current landscape.
