### Tesla vs. Trump Feud Sends Shockwaves Through Wall Street

NEW YORK (Reuters) - The escalating conflict between President Donald Trump and Tesla's CEO Elon Musk has not only captured widespread public attention but also triggered significant tremors in the stock market. On Thursday, Tesla's shares plummeted by 14% as the two leaders exchanged barbs on social media, culminating in Trump's threat to terminate government contracts with Musk's companies.

Although Tesla's stock showed signs of recovery with a 5% uptick by mid-day Friday, the initial decline exerted substantial pressure on the broader equity markets. The S&P 500 and Nasdaq 100, both heavily influenced by large-cap stocks, registered declines of 0.5% and 0.8%, respectively, largely due to Tesla's slide.

"Tesla is a widely held stock," noted Robert Pavlik, senior portfolio manager at Dakota Wealth. "When a high-profile company representing a significant portion of the index sells off, it has both a direct effect on the index and a psychological impact on investors."

Tesla's sharp decline underscored the vulnerability many investors have long warned about: the outsized influence of a handful of megacap stocks on major equity indexes. Known as the "Magnificent Seven," companies like Apple, Microsoft, and Nvidia, along with Tesla, have been key drivers of equity gains in 2023 and 2024. However, 2025 has proven more volatile so far, with Tesla's turmoil adding to the uncertainty.

Together, the Magnificent Seven accounted for nearly one-third of the S&P 500's total weight as of Thursday. Tesla's market value, which was slashed by about $150 billion during Thursday's fall, resulted in its weighting within the S&P 500 and Nasdaq 100 dropping to 1.6% and 2.6%, respectively.

Tesla's shares have tumbled approximately 37% since mid-December, a period over which the S&P 500 has only fallen by about 1%. This wide-reaching influence extends to exchange-traded funds (ETFs) as well; Tesla features in approximately 10% of the total 4,200 ETFs tracked, including the Consumer Discretionary Select Sector SPDR Fund and the Roundhill Magnificent Seven ETF, which saw declines of 2.5% and 2.6%, respectively.

"It's very important to know holistically what is in all your ETFs, because a lot of them are overlapping," pointed out Todd Sohn, ETF and technical strategist at Strategas.

As Wall Street continues to feel the ripple effects of the Trump-Musk feud, investors are reminded of the high stakes tied to the performance of just a few dominant companies.