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Most stocks fell further today after the Federal Reserve raised interest rates yesterday. This is the Fed’s third consecutive move of 75 basis points (0.75%). That said, You’re here (NASDAQ:TSLA) is falling more sharply than the broader market today. At the time of writing, TSLA stock has fallen nearly 4% as investors assess company-specific news.
Today, reports are circulating that Tesla has recalled approximately 1.1 million vehicles due to a manufacturing issue. An automatic window reversing system in Tesla vehicles may not react correctly after detecting an obstacle. As a result, with the potential for passengers to pinch their fingers through their car windows, the National Highway Traffic Safety Administration issued a report stating that “these vehicles do not meet the requirements of Federal Motor Vehicle Safety Standard number 118 , ‘Power- Operated Window Systems.’”
This news, coupled with increasingly bearish sentiment in the markets, seems to be prompting investors to take a more defensive stance today. Let’s see what to do with this news.
Why is TSLA stock falling today?
Like other automakers, Tesla has been hit with a number of recalls over the years. As Tesla bull Fred Lambert noted in a recent Elektrek article, most of these recalls have been resolved with simple over-the-air software updates. This most recent issue would also be resolved via a software update.
As a result, bulls may be correct that headlines in the media may be misleading. While any kind of potential hazard that could cause injury should be considered a big deal, something that can be fixed with a software update and doesn’t require a vehicle to visit the store, really can’t be ‘recalled. “. As a result, this game of semantics is one that continues to polarize the bulls and bears in TSLA stock.
So, perhaps broader macro factors such as rising interest rates are what investors should watch more closely with TSLA stocks. After all, although Tesla is profitable, it is still a high-growth name that trades at an extreme multiple. If overall demand for high-priced luxury goods were to decline, Tesla’s growth could decline significantly. After all, the market for SUVs priced above $125,000 is limited and could shrink if we see the kind of economic downturn suggested by the Fed is likely.
As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.