TLDR
- Tesla stock fell 0.9% to $418.01, ending a six-day winning streak that added 22% to share price
- CEO Elon Musk’s $1 billion stock purchase and robo-taxi expansion plans fueled recent rally
- Federal Reserve expected to cut rates by 0.25% at 2 p.m. ET, which could benefit auto sales
- Tesla’s RSI indicator shows overbought conditions, suggesting possible profit-taking
- NHTSA opens probe into 2021 Model Y door handle defects while company settles fatal crash lawsuits
Tesla shares dropped in Wednesday trading after a remarkable six-day winning streak came to an end. The electric vehicle maker’s stock fell 0.9% to $418.01 in early trading.
The recent rally had been impressive for Tesla investors. Over six consecutive sessions, shares gained approximately $75, representing a 22% increase.
Several factors contributed to the stock’s recent momentum. CEO Elon Musk disclosed a $1 billion stock purchase on Monday, demonstrating confidence in his company.
Tesla also appears ready to expand its self-driving taxi service to Las Vegas. The company launched its robo-taxi service in Austin, Texas, in June after years of development.
Federal Reserve Decision Takes Center Stage
Wednesday’s trading focus shifted to the Federal Reserve’s interest rate decision. The central bank is expected to announce a 0.25% rate cut at 2 p.m. Eastern time.
This cut would lower the target fed-funds rate to between 4% and 4.25%. The rate started 2025 in a range of 4.5% to 4.75%.
Lower interest rates typically benefit car companies like Tesla. Many vehicle purchases involve financing, and reduced rates mean lower monthly payments for consumers.
However, the expected nature of the rate cut might limit any stock price boost. Tesla shares have already surged more than 20% in recent days.
Technical Indicators Signal Caution
The stock’s 14-day relative strength index has reached levels indicating overbought conditions. This technical measure suggests the recent rally may have pushed shares too high too fast.
Wednesday’s premarket weakness could represent profit-taking ahead of the Fed announcement. Investors often sell positions before major market events to lock in gains.
Tesla’s stock volatility remains well above other major companies. Shares have traded between $212 and $488 over the past 12 months, a $276 range representing about 65% of the current price.
Apple’s comparable volatility measure yields less than 40%. This highlights Tesla’s more dramatic price swings compared to other large-cap stocks.
Regulatory and Legal Challenges Emerge
The National Highway Traffic Safety Administration opened an investigation into Tesla’s 2021 Model Y door handles. The probe examines whether the electrically powered handles are defective.
The regulator will assess Tesla’s approach to supplying power to door locks. It will also evaluate the reliability of the power supply systems involved.
Tesla has agreed to settle two lawsuits related to fatal 2019 crashes. These cases involved the company’s autonomous driver-assistance software.
The settlements follow a Florida jury verdict in early August. That case awarded $243 million in damages to victims of a Model S crash.
Both settled cases had trials scheduled to begin in October. The resolution removes potential legal uncertainty for the company.
Stock Performance Context
Tesla shares have gained about 4% year-to-date after the recent rally. The stock is up approximately 85% over the past 12 months.
Retail sentiment on Stocktwits remained extremely bullish at 89 out of 100. Message volume about the stock was also extremely high.
Analysts expect Tesla to beat delivery estimates for the third quarter. This expectation has helped support the recent stock price increase.
Musk has indicated he plans to spend more time focused on Tesla. This commitment comes as he manages multiple business ventures simultaneously.
The current stock price of $418.01 reflects the market’s mixed reaction to recent developments and upcoming Fed policy changes.
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