Tesla Stock News and Forecast: TSLA suffers as yields continue to dominate

Tesla stock falls sharply on Thursday as investors react to the Fed dot plot.
Higher yields hurt growth stocks as TSLA stock falls 4%.
More pain is in store for Tesla as European equities head south.

Ivan Brian FXStreet

Tesla (TSLA) reacted poorly to the latest central bank developments with the stock falling 4% on Thursday. Main indices were not as badly hit with the S&P 500 losing less than 1% and the Nasdaq just over 1%. Tesla again then demonstrated its high beta.

Tesla stock news

Equities are being driven lower by bond yields, and little in the way of company-specific news can be attributed to Thursday's Tesla fall. The move is more a macro positioning one and perhaps some technical details. As investors take more money out of ETFs and indices, those index-tracking funds are forced to sell the largest holding. Tesla naturally is one of the largest holdings in numerous ETFs and index trackers. It comes as no surprise that investors are pulling cash from equities as bond yields rise and make them a viable alternative.

This move has again increased this morning in Europe, and the 2-year yield is now heading for 4.5%. A not-so-shabby return to shelter some cash in times of equity stress. Of course, the picture was not helped by a recall for Tesla cars in the US. Reuters reported on Thursday that Tesla was recalling 1.1 million cars due to a faulty window reversal system. However, this news appeared to hit newswires before the market opened on Thursday and had little impact on TSLA stock in the premarket, so it seems it was not the major reason for the aggressive sell-off.

Tesla stock forecast

The repeated failure at the top of the range at $314.64 now seems likely to result in a breakout lower at $281. This should see a swift test of $266 as the next support zone. The area around $240 has some strong volume history so could stall any move lower, but $207 remains the bearish target for now. Only a break of $314 changes this picture in my view.

Tesla chart, daily

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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