Tesla Plunges Below S&P 500 Inclusion Level As Yesterday's Selloff Intensifies

So goes Bitcoin, so goes Tesla.

At least that was the manta on Tuesday morning as Tesla (TSLA) shares plunged in the pre-market session, extending yesterday's ugly losses and falling below the level where Tesla was included into the S&P 500. In addition to Tesla plunging, Bitcoin was also down about 15% heading into the cash open on Tuesday and a newly announced SPAC deal for Lucid Motors had pulled back more than 40% from highs it made just days ago.

This means that everyone who chased the S&P 500 trade, in addition to anyone who admittedly has been buying over the last 2-3 trading days *cough* Cathie Wood on CNBC last week *cough* is now in the red.

(Click on image to enlarge)

Hilariously, Tesla bull Cathie Wood was actually predicting a market turnaround for the NASDAQ last week. She joined CNBC's Scott Wapner and warned of the increasing risk of a stock market correction if rates continue to "sharply" rise. 

Around the 3:30 minute mark of the CNBC video, Wood told Wapner, "I do believe if rates were to take a sharp turn up, that we would see a valuation reset and our portfolios would be prime candidates for that valuation reset of course."

Wood went on to say:

"Now one of the things that I found interesting over the last really 20 years is that the S&P's P/E ratio tends to peak out in the 20 to 25 times range of forward earnings. And I think the reason for that is most portfolio managers and maybe quantitative research researchers are looking at normalized nominal GDP growth in the 4-5% range, which is where long-term interest rates should be normalized. We actually think normalized GDP growth is probably closer to 3%."

She continued: 

"Now, if you think that's where long-term interest rates should stabilize, if you think of 20 to 25 times that's one over four to five percent growth, so it's the inverse of the growth rate, the nominal GDP growth. And that's where it seems to be peaking out. We think it's there, longer term. I agree there will be a valuation reset. There will be fear."

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