TMTPOST -- Tesla Inc. shares settled 8.3% lower to $440.13 on Wednesday, registering their worst day in more than two months. Tesla, as the top loser of tech giants, was among hard-hit stocks as the U.S. stock market suffered a bloodbath after the Federal Reserve raised concerns about higher-than-expected interest rate for the coming year 2025. The benchmark S&P 500 index closed nearly 3% lower, recording its biggest daily loss on Fed’s decision day since September 17, 2001.
Credit：Tesla
The Federal Reserve announced after a monetary policy meeting it decided to cut its policy rate by 25 basis points (BPs), or a quarter percentage point, to the range of 4.25%-4.50% on Wednesday. But the U.S. central bank also said it sees just 50 BPs of cuts next year, based on its December dot plot projection, namely only two 25-BP cuts in 2025, down from 100 BPs in cuts projected in September. The updated projections peg the federal funds rate, or policy rate, at 3.9% by the end of next year and 3.4% by the close of 2026.
The Federal Reserve lifted its forecast for the Fed’s preferred inflation gauge, so-called core prices excluding volatile food and energy items next year to 2.5%, up from 2.2% projected in September. That estimate showed a decline in prices compared to the projected 2.8% at the end of this year.
The Federal Reserve showcased a hawkish stance by signaling it will slow rate cuts, or halt the cuts temporarily following its third straight cut since September. In a policy statement, the central bank added the phrase “the extend and timing” to modify potential rate adjustments, hinting the future cuts will come at a slower pace.
The Federal Reserve Chair Jerome Powell confirmed slower rate cuts on the horizon. The Fed has been or closer to the timing of slower cuts, Powell told reporters at a news conference after the meeting.“Today was a closer call, but we decided it was the right call,” Powell said. He later added, “From here, it’s a new phase, and we’re going to be cautious about further cuts.” Powell indicated that the new language “extent” of future adjusments refers to how much room the Fed has left to cut rates without overstimulating the economy, while another new word “timing” suggests a slower pace of change going forward.
Despite the pullback snapping their three-day record-breaking streak, Tesla shares remained robust momentum since Donald Trump won the U.S. election last month. As of Wednesday close, shares still rose 75% since Election Day on November 5 as investors bet on the incoming Trump administration’s possible deregulation move.
Advisors were told that Trump’s transition team planned to make a federal framework for self-driving vehicles one of the Transportation Department’s priorities, Bloomberg reported last month, citing sources familiar with the matter. The Trump team is reportedly looking to staff the department with leaders who will develop a framework for regulating self-driving vehicles. The report also revealed lawmakers’ effort s to clear a path for autonomous vehicles (AVs). A bipartisan legislative measure that’s at the early-discussion stage would create federal rules around AVs, according to the sources.
The Trump transition team has recommended the incoming administration scrap a National Highway Traffic Safety Administration (NHTSA) order requiring automakers to report crashes involving self-driving systems, Reuters cited a document last Friday. To kill the order is evidently a good news for Tesla. The company has had to report more than 1,500 crashes to NHTSA involving its Full Self-Driving (FSD) and Autopilot software, Reuters said.
Wedbush Securities analyst Dan Ives, a long-term Tesla bull, earlier this week raised his price target on Tesla by 26% to $515, and maintains a Buy rating. The upward revision reflected anticipated support from artificial intelligence (AI) and deregulation under Trump‘s administration. Ives described these supportive policies as a total game changer for Tesla’s autonomous and AI initiatives in the coming years. under Trump‘s administration. The analyst thinks Tesla's progress in full self-driving (FSD) technology and its work toward a favourable regulatory environment can turbocharge the automaker's valuation over the next 12 to 18 months. He even presented a bullish scenario with a price target of $650, or a market capitalization of more than $2 trillion.
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