Stephen Culp
5 min read
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By Stephen Culp
NEW YORK (Reuters) -Wall Street veered to a sharply lower close and crude prices advanced on Thursday as a high-profile dispute between U.S. President Donald Trump and billionaire Elon Musk overshadowed trade talks between Washington and Beijing and a spate of downbeat economic data.
Stocks wavered through much of the session, but turned decisively lower as a falling-out unfolded between Trump and Musk, the billionaire Trump tapped to lead the Department of Government Efficiency (DOGE).
A 14.3% plunge in Tesla shares followed Trump's threats to terminate Musk's government subsidies after Musk criticized Trump's tax and spending bill. Tesla helped pull the Nasdaq down the most, while the S&P 500 and the Dow suffered shallower losses.
"There's a diversity of opinion on whether or not the 'Big, Beautiful Bill' addresses the debt or the deficit at all, or if it goes in the opposite direction," said Thomas Martin, Senior Portfolio Manager at GLOBALT in Atlanta. "This Trump-Musk spat sort of exemplifies that."
Trump held talks with Xi by phone on Thursday in an effort to iron out trade disputes between the world's two largest economies that have buffeted the global economy, and they agreed to further discussions, according to U.S. and Chinese summaries of their call.
"The market seems to be accepting that if they're talking they're not going to do anything drastic, and if they don't do anything drastic, then it's okay to buy stocks now," Thomas added. "People are just sort of guessing and wondering which way the wind is blowing and the wind keeps shifting."
"I think investors want to own stocks and they're afraid of missing out, but they also don't want to own stocks if it's going to be a disaster," Martin added.
Economic data showed initial jobless claims hit the highest level since October, while a 16.3% drop in imports - arising from Trump's erratic tariff policy - resulted in the narrowest U.S. trade gap since November 2023.
Weaker-than-expected labor market data, including a 47% year-on-year jump in Challenger layoffs and a significant downside surprise in ADP's private payrolls, are dampening expectations for the Labor Department's closely watched May employment report expected on Friday.
But Matthew Keator, managing partner in the Keator Group in Lenox, Massachusetts believes the softer data could open the door for the Federal Reserve to implement more than one rate cut before the end of the year.
