TSLA

Why Tesla Stock Was Slammed on Wednesday

What happened

Shares of electric-car company Tesla (NASDAQ: TSLA) tanked on Wednesday. As of 12:30 p.m. EDT today, the stock was down 11.3%.

The stock's sharp decline was likely primarily driven by a sell-off in the overall market as concerns about the coronavirus impact on the economy persist.

A chart showing a stock price plummeting

Image source: Getty Images.

So what

Another possible reason for the sharp decline in Tesla's shares on Wednesday is news that the sheriff of Alameda County, California, had ordered the automaker to stop work at its factory in Fremont. But employees reportedly showed up on Wednesday morning anyway. Tesla had said in a previous email to employees that the federal government had "directed that all National Critical Infrastructure continue to operate during this global pandemic." The company said this included auto manufacturing.

But Tesla also urged employees to follow social-distancing guidelines and to stay home if they have flu-like symptoms.

The S&P 500 was down about 6.2% at the time of this writing. Tesla stock's decline, therefore, was worse than the overall market. It's not surprising to see shares of the automaker tank faster than market indexes since it is coming off a huge run-up in recent months that led to massive outperformance. Even after the stock's slide amid the coronavirus bear market, shares are still up 56% over the last six months, crushing the market's 21% decline over this same time frame.

Now what

Investors should look to see whether the sheriff's office continues to push for Tesla to close its factory or if the company proves to be correct about continuing to manufacture vehicles during this pandemic.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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