How a Trump-Musk feud and economic worries shook the markets

2 minutes read

06 June 2025

How a Trump-Musk feud and economic worries shook the markets

Thursday on Wall Street wasn’t just another day of numbers ticking up and down. It was a day when two of America’s most recognisable figures—Elon Musk and Donald Trump—turned a personal feud into a market-moving event. Their spat, combined with fresh economic jitters, sent shockwaves through the stock market and left investors on edge as they looked ahead to Friday’s crucial jobs data.

A billionaire feud spills onto the trading floor

It started with a few pointed words, but quickly escalated into a public brawl. President Donald Trump, never one to shy away from a fight, threatened to axe government contracts and subsidies tied to Elon Musk’s companies. “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts,” Trump posted on social media, sparking immediate panic among Tesla shareholders.

The fallout was swift and brutal. Tesla’s stock crashed over 14% in a single session, erasing a staggering $153 billion in market value—the worst one-day loss in the company’s history. The S&P 500 and Nasdaq Composite both slipped, as investors digested the implications of the feud. “The fallout for Tesla stock is self-evident,” said Mark Spiegel, portfolio manager at Stanphyl Capital. “I see no meaningful fallout from this for the rest of the market, other than its slight effect on the indexes and index funds. The overall stock market has plenty of problems, but Tesla isn’t one of them.”

But the drama didn’t stop there. As Musk and Trump traded public insults, the uncertainty spilled over into other sectors. Rivals like AST SpaceMobile and EchoStar saw their shares jump, as investors sought safer ground in the space sector. Mike Zigmont of Visdom Investment Group described the conflict as a “petulant drama” that unsettled equity markets, even as bond markets remained calm. Stock chart showing Tesla’s dramatic drop of 14.26% to $284.70, with a market cap of $915.74B, after hours data, and a day range of $273.42 - $324.55. The Winvesta logo is in the top right corner.

Economic clouds gather as investors eye the Fed

Beyond the headlines, deeper worries about the economy were already simmering. Weak private payroll and services sector data earlier in the week had raised fresh concerns about a slowdown, just as investors braced for Friday’s all-important nonfarm payrolls report. Initial jobless claims rose for the second week in a row, adding to the sense that the U.S. economy might be losing steam.

Kansas City Federal Reserve Bank President Jeff Schmid voiced his concerns about rising tariffs and the risk of rekindling inflation. “Upward price pressure could be apparent in coming months but not fully known for much longer,” he warned, signalling that the Fed is likely to keep interest rates steady for now. Despite President Trump’s calls to slash rates, Fed Chair Jerome Powell has opted for caution, waiting for more data before making any moves.

Meanwhile, the corporate earnings season added its own twists. Lululemon’s shares tumbled after the company cut its full-year outlook, citing a “dynamic macroenvironment.” Procter & Gamble announced plans to slash 7,000 jobs, and Brown-Forman’s stock plummeted after a downbeat forecast. These stories, while overshadowed by the Trump-Musk drama, reminded investors that challenges remain across the board.

As Katherine Bordlemay, co-head of Americas client portfolio management for fundamental equities at GSAM, put it: “Recent market moves are further indication that with economic policy shifts, and higher geopolitical and headline sensitivity, equity markets will be characterised by greater volatility and velocity than in the previous cycle.”

The week’s events show just how quickly sentiment can shift on Wall Street. One day, it’s a billionaire feud; the next, it’s economic data or a surprise earnings miss. For investors, the message is clear: buckle up, because this market isn’t slowing down any time soon.

Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage companies, and not those of Winvesta. We advise investors to check with certified experts before making any investment decisions.