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Why Tesla Stock Fell Sharply on Tuesday

By Daniel Sparks - Mar 2, 2021 at 4:37PM

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It's now down nearly 3% year to date.

What happened

Shares of Tesla (TSLA 7.33%) were slammed on Tuesday, falling as much as 4.7%, and finishing 4.5% lower by the end of the trading day.

The stock was likely down due to a broader sell-off on Tuesday that was particularly tough on growth stocks.

A blue Model Y

A Tesla Model Y. Image source: Tesla.

So what

Tesla's decline today follows a surge in the stock price on Monday, and it extends a period of very volatile trading. During part of last week, shares were pummeled along with many other growth stocks, but Tesla roared higher on Monday amid the S&P 500's best day since June. 

Highlighting bearishness in the overall market on Tuesday, the S&P 500 closed the trading day down 0.8% and the Nasdaq Composite declined 1.7%. Many growth stocks like Tesla were hit even harder, falling several percentage points or more. The automaker's shares are now down 2.7% for the year.

Now what

Growth stocks are typically much more volatile than the overall market, so investors should expect to see plenty more volatility from Tesla.

Shareholders should remain focused on the company's underlying business rather than its volatile stock price. Management expects 2021 to be pivotal for Tesla. The company guided for more than 50% year-over-year growth in vehicle deliveries, and it said it believes it will generally remain cash flow positive, even as it invests aggressively in expansion.

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