The Dow Fell 124 Points. Blame Tesla and Congress.

Stocks fell Friday. Chalk that up to the addition of Tesla into the S&P 500 and the lack of fiscal stimulus at a time when stocks have been roaring higher.

The Dow Jones Industrial Average fell 124.32 points, or 0.4%, to close the day at 30,179. The S&P 500 fell 0.35%, while the Nasdaq Composite fell 0.1%. The biggest gainer in the S&P 500 was Fortinet (FTNT), up 6.9% as news about the SolarWinds cyberattack lifted shares of security companies.

Tesla got a big lift as well, rising 6% as the Nasdaq 100, comprised of other large-cap stocks of innovative companies, fell 0.1%. Tesla swung wildly in the last half-hour of trading, falling more than 3% at one point.

The company will be added into the S&P 500 Monday, and will be among the 10 largest-capitalization stocks in the index. Exchange-traded funds and indexed mutual funds that mirror the S&P 500 will have to buy the stock, but they are 100% invested in the market, explained Tim Anderson, managing director at TJM Brokerage, in an interview with Barron’s.

Simply put, these funds don’t hold cash, so they can’t buy Tesla unless they sell other S&P 500 stocks to raise the money. That pressures the other stocks in the index.

At the same time, some traders often buy up a stock ahead of its inclusion in an index, James Ragan, director of wealth management research at D.A. Davidson, told Barron’s. Tesla has run up 9% since Dec. 4, the day that marked the start of a recent choppy phase for stocks, while the S&P 500 is up 0.3%. It isn’t clear whether short-term traders played a role in the swings in Tesla shares toward the end of trading Friday.

The other dynamic keeping a lid on stocks is that Congress, in the eyes of some on Wall Street, is failing to deliver by completing a deal for aid to prop up the economy. The $908 billion package of spending that investors have been counting on hadn’t been approved as the weekend approached.

“We’ve had a pretty strong week related to vaccine news, expectations for a fiscal stimulus package,” Ragan said. “A little consolation from the all time highs and then a little bit of a pause going into the weekend.”

JJ Kinahan, chief market strategist at TD Ameritrade wrote in a blog post Friday, “It’s very hard to get things done in a lame-duck Congress. The market taking it pretty hard, with so much stimulus premium already built in.”

The lack of stimulus comes at a time when many on Wall Street have noted stocks look a bit overextended on a technical basis. “With successive new highs, the equity market may be getting ahead of itself in the short term,” wrote David Donabedian, chief investment officer of CIBC Private Wealth, in emailed remarks to reporters. Even in Thursday’s S&P 500 rally, only 41% of stocks on the index rose.

Write to Jacob Sonenshine at