Tesla Suffers Worst Day In History As Tech Names Continue To Rout

Tech stocks suffered a broad sell-off yesterday as US markets returned to action following the holiday weekend. Tesla (TSLA) was hit the hardest, sinking 21.1% after the S&P 500 Index Committee declined to add the electric carmaker to the benchmark index.

The committee added online store Etsy (ETSY), test equipment maker Teradyne (TER) and pharmaceutical firm Catalent (CTLT). Investors had been anticipating Tesla’s entrance into the index this quarter after it delivered a fourth consecutive quarter of profit, a requirement for inclusion. Being added to the index would mean a host of funds tracking the S&P would have to buy the stock, potentially giving the firm’s share price a boost.

Tesla’s 20% plus loss was part of a broader sell-off among major tech names over the past week. Investments made by Japanese investment giant Softbank (SFTBY) have raised questions about the fragility of tech stocks’ mega run over the past several weeks. Per The New York Times, Softbank bought billions of dollars-worth of tech stocks, betting that prices would keep rising. As the stocks soared, the firms that sold Softbank the options became forced buyers in order to hedge their risk. More pain came after hours when Slack (WORK), the communications app, tanked 18% after posting its results. Despite beating revenue growth forecasts, it failed to see the kind of surge that Zoom (ZM) has seen since the coronavirus emerged.

The sell-off in the US set the tone for Asian markets, where further losses were seen overnight.

GM jumps after buying 11% stake in electric car firm Nikola

There was a host of news yesterday extending beyond the tech sell-off. General Motors(GM) bought an 11% stake in electric vehicle maker Nikola Corp (NKLA), as part of a deal to help the firm to develop and manufacture new models. The announcement sent GM stock 7.9% higher. Elsewhere, JPMorgan (JPM) announced it is investigating employees and customers over misusing government stimulus funds, Apple (AAPL) counter-sued Epic Games for adding an in-app payment system to the Fortnite video game, and Boeing (BA) announced a second problem with production of its 787 Dreamliner. JPMorgan, Apple and Boeing fell 3.5%, 6.7% and 5.8% respectively during normal market hours. 

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