Nasdaq down 5.3% as Fundstrat Tom Lee blames forced seller

Tom Lee of Fundstrat, a Wall Street research firm, stated on Friday that a single forced seller likely caused the recent Nasdaq selloff, leaving other tech holders with the losses.

By the close of trading, the Nasdaq Composite had sealed its worst month since March 2025, down 5.3%. Lee suggested the market was fighting an “internal battle” and that the selling looked forced rather than indicative of a broad exit from equities.

Forced Selling Mechanics

Speaking on CNBC as the Nasdaq slid, Lee described the market action as a liquidation event. “Today looks like someone’s getting liquidated. I don’t know if it’s an institution,” he said.

Lee defined “liquidated” as being forced to sell. This occurs when an investor buys shares with borrowed money and prices subsequently fall. The lender then demands repayment, forcing the investor to sell at any price. This type of selling drags prices even lower. Lee believes this dynamic hit tech stocks on Friday, rather than investors abandoning the asset class entirely.

To support this view, Lee pointed to an equal-weighted version of the S&P 500. This index counts every company equally, meaning a small firm carries the same weight as a giant like Nvidia. Lee noted that this index was rising while he spoke, which he interpreted as evidence that money was still in stocks. By the close, the equal-weighted S&P 500 had slipped 0.79%. In contrast, the regular S&P 500, where the largest companies carry the most weight, fell 1.82%.

Earnings and Election Timing

Intel lost almost a third of its value on Friday. The stock fell 28.6% following a weak fourth-quarter forecast, marking its worst day since 1974. Amazon also reported negative results, citing $42.4 billion in negative free cash flow driven by heavy AI spending.

A week prior to the Friday selloff, Lee had stated that yields back below 5% meant the AI selloff was ending. On Friday, the 10-year Treasury yield closed at 4.93%. Despite this, the Nasdaq recorded its worst day since June 5.

Steve Sosnick, chief strategist at Interactive Brokers, stated that his retail clients had not fled the market. However, he noted that retail investors had piled into Alphabet on Thursday.

Lee argues that large investors currently lack the conviction to buy falling stocks before Tuesday’s midterm elections. He warned that a small push could send prices sharply lower before the vote. “I think people are marking their calendar until November 3rd,” Lee added.

CNBC’s anchor stated that markets expect Democrats to edge ahead in both chambers of Congress. Sosnick described this expectation as the prevailing theory. CME FedWatch data puts the odds of a December rate hike at 72%.

Lee maintains that buyers will return. The outcome of Tuesday’s vote will indicate whether they do.