US Stocks Retreat Amidst Rising Tensions Between Trump and Musk

Market Overview

On Thursday, June 5, 2025, US stocks experienced a decline, driven primarily by escalating tensions between President Trump and Tesla (TSLA) CEO Elon Musk. This fallout overshadowed an otherwise optimistic phone conversation between Trump and Chinese President Xi Jinping, which had initially lifted investor sentiment regarding US-China trade relations.

The Dow Jones Industrial Average (^DJI) fell nearly 0.3%, while the S&P 500 (^GSPC) saw a decline of over 0.5%. The tech-heavy Nasdaq Composite (^IXIC) plunged more than 0.8%, reflecting the wider market’s negative sentiment.

Trump vs. Musk: Tensions Escalate

President Trump's public spat with Musk unfolded on social media, following Musk’s criticism of Trump’s tax-and-spending bill. In a post on Truth Social, Trump suggested that one way to save money in the budget would be to terminate Musk’s government subsidies and contracts. Consequently, Tesla's stock closed down by more than 14%, marking one of its worst single-day losses historically.

Trump’s comments came soon after he confirmed a positive phone call with Xi Jinping, where they discussed trade intricacies. This phone call lasted about one and a half hours and was perceived as a step forward in easing trade tensions.

Labor Market Concerns

The US labor market showed signs of slowing, with the Department of Labor reporting that weekly unemployment claims hit their highest level in eight months during the final full week of May. Initial jobless claims surged to 247,000, exceeding economists' expectations and suggesting a growing number of individuals are facing prolonged unemployment.

As investors look ahead, the May jobs report scheduled for release on Friday is anticipated to provide a clearer picture of employment trends under current economic conditions marked by trade disruptions.

Certain Stocks in Focus

In the corporate scene, stablecoin firm Circle (CRCL) debuted in the market with shares skyrocketing over 200% from its IPO price. Following its initial trading price of $31 per share, it quickly rose to over $92, reflecting investor enthusiasm.

Other stocks also reflected varying impacts of the day’s news. Amazon (AMZN) gained as much as 2% on the positive news of the Trump-Xi call, while Palantir (PLTR) shares fell as Republican Congress members raised privacy concerns regarding its data practices.

Looking Ahead

The market watched tensions between Trump and Musk closely, with implications for Tesla’s future as the CEO finds himself at odds with the Trump administration. Investors are left to ponder the impacts of geopolitical tensions and domestic labor market dynamics on their portfolios.

With the release of forthcoming economic data and ongoing corporate earnings reports, market participants will be keen to see how these factors shape investment strategies in the coming weeks.