Today: Tesla founder and CEO Elon Musk comments on fire that sparked a sell-off in Tesla stock on day shares turn around. Also: Wall Street rebounds as Instagram ads propel Facebook.

The Lead: Tesla CEO praises Model S response in car fire caught on tape

After two days of declines on Wall Street following a video of a Model S on fire that went viral, Tesla shares turned around Friday and the company's cofounder and CEO, Elon Musk, responded to critics by saying a gasoline-powered car would have fared much worse in the same incident.

Interior of the Tesla auto plant in Fremont, Calif. Tuesday, June 12, 2012.
Interior of the Tesla auto plant in Fremont, Calif. Tuesday, June 12, 2012. (Patrick Tehan/Bay Area News Group)

The video of Tuesday's fire on a Washington highway spread like wildfire around the Web on Wednesday, and Tesla shares -- up more than 450 percent on the year at that point -- quickly descended, losing more than 10 percent Wednesday and Thursday. The main concern is that the fire -- along with previous combustion issues with electric cars, including problems Chevrolet faced when rolling out the Volt -- could dissuade potential buyers from taking the leap and buying a Tesla, hurting the company's growth rate.

"With new technologies such as lithium ion batteries, there's heightened awareness around a fire,'' RW Baird research analyst Ben Kallo told the Mercury News on Thursday, adding that fears could make potential customers for the Palo Alto-based company wait even longer to make a purchase.

However, in a blog post Friday, Musk attempted to quell fears that Tesla's Model S was prone to such incidents, pointing out that it was the first fire one of the sedans had suffered while gasoline-powered car fires are relatively common.

"There are 150,000 car fires per year according to the National Fire Protection Association, and Americans drive about 3 trillion miles per year according to the Department of Transportation. That equates to 1 vehicle fire for every 20 million miles driven, compared to 1 fire in over 100 million miles for Tesla," Musk pointed out.

The blog post also went into great detail on the incident that sparked the fire, explaining that a large metal object, believed to be part of a large truck, struck the bottom of the Model S with unusual force that pierced the armor plate protecting the car's battery pack. Musk also stressed that the safeguards in the battery pack kept the fire from spreading to the passenger enclosure.

"Had a conventional gasoline car encountered the same object on the highway, the result could have been far worse. A typical gasoline car only has a thin metal sheet protecting the underbody, leaving it vulnerable to destruction of the fuel supply lines or fuel tank, which causes a pool of gasoline to form and often burn the entire car to the ground," Musk wrote.

Tesla's Model S has been the most important factor in the company's booming Wall Street success in 2013, with successful sales allowing Musk to announce its first profitable quarter and pay off the federal government's loan much earlier than expected. Shares resumed their upward trajectory Friday, gaining 4.4 percent to $180.98.

However, a Wall Street Journal blog item warns that Tesla's recent decline sets off technical alarm bells that could portend a decline of up to 30 percent from current levels.

"You have to respect these negative formations when they occur," Ladenburg Thalmann chief technical analyst Adolfo Rueda told the Journal. "The trend is very, very extended. I wouldn't buy it."

SV150 market report: Facebook sets new all-time high as stocks rebound

Wall Street rebounded Friday from heavy losses earlier in the week, but still ended the week down as politicians keep the government shut down due to partisan squabbling. Silicon Valley tech stocks joined in the gains, as Facebook bounced back from recent weakness after announcing that the Instagram photo-sharing service will start selling ads.

Facebook gained 3.8 percent to a record closing high of $51.04 after Instagram announced that it would begin serving photo and video ads to its users in the first revenue-generating effort for the San Francisco photo-sharing service since its $1 billion acquisition by the Menlo Park social network last year. Analysts praised the move Friday: Stern Agee analyst Arvhind Bhatia raised his price target on Facebook stock from $50 to $58 and wrote, "we estimate Instagram could generate $800M in revenue in the next 3-4 years."

Adobe (ADBE) showed no ill effects on Wall Street after announcing a major data breach, with the San Jose software company rising 1.4 percent to $54.57. Yahoo (YHOO) continued to establish multiyear highs, selling for more than $35 for the first time since 2006 before closing with a 3 percent increase at $34.89 despite reports that Alibaba will not exercise an initial public offering this year. Yelp continued to rise to record prices, establishing an all-time intraday high of $73.22 while gaining 3.1 percent to a record closing price of $73.22, and Netflix (NFLX) gained 1.7 percent to $327.26.

While few of Silicon Valley's largest tech companies fell Friday, two of its biggest names failed to advance. Apple (AAPL) fell 0.1 percent to $483.03 as retailers announced cut-rate prices of its new iPhone 5C and an analyst check showed greater supply of the iPhone 5S than its predecessor at the same time, while Google (GOOG) dropped 0.4 percent to $872.35.

Up: SolarCity, Tesla, Pandora, SunPower (SPWRA), Facebook, Juniper, Yelp, Yahoo, Electronic Arts (ERTS), Zynga, Symantec, Gilead, Netflix, Hewlett-Packard (HPQ), Salesforce, VMware, Applied Materials, Nvidia, Adobe, eBay

Down: Google, Apple, LinkedIn, Workday

The SV150 index of Silicon Valley's largest tech companies: Up 9.94, or 0.75 percent, to 1,342.55

The tech-heavy Nasdaq composite index: Up 33.41, or 0.89 percent, to 3,807.75

The blue chip Dow Jones industrial average: Up 76.1, or 0.51 percent, to 15,072.58

And the widely watched Standard & Poor's 500 index: Up 11.84, or 0.71 percent, to 1,690.5

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.