Stocks slide after long weekend, led by Tesla after S&P 500 snub
After an uptick that analysts say is atypical for September, U.S. markets plummeted Thursday and Friday, dragged down by the tech giants ahead of the long holiday weekend. Wall Street was closed on Labor Day.
Big Tech was still losing ground Tuesday afternoon: Amazon gave up 3.1 percent, Facebook shed 2.9 percent and Alphabet fell by 2.9 percent. (Amazon chief executive Jeff Bezos owns The Washington Post.) And biotechnological firm Moderna, which is working on a coronavirus vaccine candidate, was down nearly 11 percent, despite last week’s gains.
Tesla shares plunged 15 percent Tuesday after the S&P 500, in a surprise move, passed on the carmaker. Investors in the high-flying electric car company had been banking on Tesla joining the benchmark index — its share price has been rising all summer. In 2019, more than $11.2 trillion in assets were benchmarked to the index, according to an estimate from S&P Dow Jones Indices.
S&P Dow Jones Indices, the company that oversees the S&P 500, instead announced late Friday it would add e-commerce site Etsy, tech maker Teradyne and pharmaceutical company Catalent, effective Sept. 21. The index will delete tax preparation company H & R Block, department store chain Kohl’s and beauty brand Coty.
A special S&P committee determines which companies populate the index based on a variety of factors, but meeting the necessary criteria does not guarantee inclusion. S&P said in a news release Friday it was also changing the lineup to its mid- and small-cap indexes “to ensure each index more appropriately represents its market capitalization range.”
Adding Tesla had been “viewed as almost a consensus move based on all the metrics that Tesla was likely to get into the S&P 500 club this time around,” Dan Ives, an analyst at Wedbush Securities said in a note to clients after the S&P’s decision. Its omission “thus will have a negative knee jerk investor reaction.”
Ives said Tesla’s profitability and earnings forecast were likely the deciding factors for excluding the company. But the snub for Tesla boosters will remain a mystery. “In a nutshell Tesla not getting into the S&P 500 will be a head scratcher to the bulls that viewed this as virtually a lock given all the parameters met,” he said.
