U.S. Markets Decline on Tesla Shock and Economic Concerns
U.S. equity indices ended the session in negative territory on Thursday, weighed down by a steep drop in Tesla shares. The S&P 500 declined by 0.5%, the Nasdaq Composite lost 0.8%, and the Dow Jones Industrial Average edged lower by 0.3%. The dramatic fall in Tesla stock, down 14.3%, was driven by President Trump’s public threat to withdraw government support for Elon Musk’s businesses, following Musk’s opposition to a Trump-backed spending bill. Musk responded publicly on social media, accusing Trump of lying and criticizing the bill’s excessive spending. He also announced that SpaceX would begin decommissioning its Dragon spacecraft.
Trade Hopes Reignite Briefly After Trump-Xi Call
Earlier optimism, sparked by a phone call between President Trump and Chinese President Xi Jinping, offered temporary market relief. The two leaders discussed progress on a preliminary trade deal and agreed to resume negotiations, easing tensions. However, gains were short-lived as sector-wide losses took over. All sectors closed lower except communication services. Consumer discretionary led declines, falling 2.5%.
Economic Data Signals a Mixed Outlook
A blend of labor market weakness and shifting trade dynamics has created uncertainty around the strength and direction of the U.S. economic recovery.
U.S. Labor Market Under Pressure
Recent labor statistics painted a cautious picture. Weekly jobless claims hit their highest level since October 2024, while Challenger reported a 47% year-on-year surge in job cuts, signaling potential cracks in the employment landscape.
Trade Deficit Narrows but Raises Questions
The U.S. trade deficit posted a record narrowing due to a sharp drop in imports. While this could temporarily boost second-quarter GDP, the contraction also reflects underlying economic volatility tied to trade policy uncertainty.
Market Focus: Nonfarm Payrolls and Fed Rate Outlook
Investor attention now shifts to the upcoming U.S. nonfarm payrolls report, with expectations centered around a 125,000 job increase. A weaker figure could strengthen expectations that the Federal Reserve will hold rates steady until at least September.
Asia and Europe: Cautious Optimism with Mixed Performance
Asian and European markets presented a mixed picture as investors processed U.S. news and awaited further trade developments.
Asian Markets Hold Steady
Asian equities were broadly unchanged. Japan’s Nikkei and TOPIX gained 0.5% and 0.6% respectively, aided by weaker spending data that may reduce pressure on the Bank of Japan to raise interest rates.
European Shares Rise on ECB Action
European equities rose following the European Central Bank’s 25 basis point rate cut and a downward revision in inflation forecasts. German factory orders surprised to the upside in April, defying expectations of a decline and supporting the upbeat close.
Currency and Commodities
The U.S. dollar steadied around the 98.8 mark, while the euro traded near 1.1440. The dollar’s recent weakness is attributed to concerns over U.S. growth and dovish Federal Reserve commentary.
Oil prices slipped in Asian trading amid concerns over global demand, though increased military action involving Russia and Ukraine helped support prices. Despite headwinds from weak economic data, oil is on track for its first weekly gain in three weeks, driven by expectations of tighter global supplies and potential new U.S. sanctions on Iran and Russia.
Stocks in Focus
Several high-profile companies saw significant share price movements driven by earnings results, policy tensions, analyst actions, and broader market sentiment.
Tesla
Tesla fell 14.3% after President Trump threatened to revoke federal support for Elon Musk’s companies in response to Musk’s criticism of a Trump-backed spending bill. Musk fired back on social media and announced plans to decommission SpaceX’s Dragon spacecraft. A planned phone call between Trump and Musk later helped ease tensions, with Tesla shares rebounding 5% in after-hours trading.
Broadcom
Despite projecting third-quarter revenues slightly above expectations, driven by strong demand for AI and networking chips, Broadcom shares dropped 4% after hours. The decline reflected investor caution over the slower recovery in non-AI chip segments. The company reported $15 billion in Q2 revenue.
Lululemon
Shares of Lululemon tumbled 22% after the company reduced its full-year profit outlook. High U.S. tariffs, rising competition, and weak consumer demand hurt performance, despite the launch of new product lines. The company has responded with modest price hikes and cost-cutting.
Circle Internet
Circle Internet, issuer of the USDC stablecoin, soared 168% in its NYSE debut, closing at $83.23 and valuing the company at nearly $18 billion. The flotation underscores growing mainstream acceptance of digital assets and Circle’s efforts to integrate USDC into the traditional financial system.
Other Notable Corporate Developments
- Procter & Gamble: Plans to cut 7,000 jobs and exit certain product lines as part of a two-year restructuring plan. The company expects a $600 million tariff impact in 2026 and will offset this with price increases, cost-cutting, and a focus on core brands like Tide and Pampers.
- Delta Air Lines: Warned that tariffs on imported planes could result in canceled orders and reduced service for 10 million customers. Industry groups have urged the Trump administration to avoid new tariffs due to risks to the aerospace supply chain and U.S. competitiveness.
- BYD: The Chinese EV giant aims to nearly triple its dealership network in South Africa by next year to capture market share amid rising demand and limited charging infrastructure.
- HSBC: Chairman Mark Tucker will step down by September 30 to become chairman of AIA Group in Hong Kong. Brendan Nelson will serve as interim chairman while HSBC searches for a permanent replacement. Former Citigroup president Jamie Forese is among potential candidates.
- Kering: In exclusive talks with buyout group Ardian to sell a stake in its Fifth Avenue property in New York as part of a broader strategy to reduce its €10.5 billion net debt. Kering aims to retain co-ownership and has already sold majority stakes in Paris properties to Ardian earlier this year.
- Robinhood: Reported strong growth in May 2025 with platform assets surpassing $250 billion. The company saw notable increases in equity, options, and crypto trading volumes, especially in after-hours trading. Margin and cash sweep balances reached record highs, despite the end of customer promotions.
- Visa: Upgraded to Outperform by Mizuho, which raised its price target to $425. The brokerage cited significant growth potential as U.S. card penetration remains at about 75%, with strong momentum in Canada and Nordic markets.
- Chewy: Downgraded to Hold by Jefferies after a 41% rally this year. The firm cited stretched valuation and limited short-term earnings upside, cutting its price target to $43.
- Bayer: Upgraded to Buy by Goldman Sachs, which highlighted solid cost discipline and operational performance in its Crop Science and Pharma divisions. The firm expects positive earnings revisions supported by potential litigation outcomes and pharma catalysts.
What to Watch
Investors are closely watching key U.S. economic releases due today:
- Nonfarm payrolls
- Average hourly earnings
- Unemployment rate
These indicators are expected to influence Federal Reserve rate expectations and broader market sentiment heading into the next quarter.
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