The stock market never ceases to amaze, and with President Donald Trump in the driver’s seat, the script can flip at a moment’s notice. 

Friday, Oct. 10 was one of those days when the screens bled red, traders went into crisis mode, and the “buy-the-dip” muscle memory came up against arguably its toughest test since spring.

The spark was that President Trump announced his administration would slap 100% tariffs on Chinese imports, tightening U.S. software exports following Beijing’s move to curb rare-earth shipments.

Here’s what happened:

• Market cap wiped: The S&P 500 tanked 2.7%, marking the worst day since April, with the Nasdaq dropping 3.6% and the Dow off 878 points, wiping out nearly $1.5 trillion in U.S. market value, while crypto markets lost about $200 billion.
• Semis hit hardest: PHLX Semiconductor Index plummeted 6.3% as supply-chain and cost fears spiked.
• Crypto cracked: Bitcoin shed 8.4%, dropping to $104,800; Ethereum lost 5.8% as the tariff shock spilled into digital assets.

Amid all the noise, Fundstrat’s Tom Lee stepped in with a sharp counter-read on the brutal selloff, which is of critical importance for near-term returns and positioning. 

For perspective, Tom Lee is one of Wall Street’s most seasoned commentators. He’s currently the co-founder and Head of Research at Fundstrat Global Advisors/FS Insight, having served as JPMorgan’s Chief U.S. Equity Strategist from 2007 to 2014. 

Hence, with over 25 years in stock research, he’s known for layering data-driven optimism with sharp contrarian reads. 

Fundstrat’s Tom Lee says market pullback “may be overdue to an extent”

One of Wall Street’s most trusted bulls said out loud what many traders have been whispering: The rally might finally need a breather. 

Following President Trump’s surprise tariff announcement on China, Fundstrat co-founder Tom Lee told CNBC after a rollicking 36% surge since April, the market’s pullback “may be overdue to an extent.”

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Despite the selloff, which is Wall Street’s worst in six months, Lee didn’t see panic in the tape.

Instead, he called out the VIX’s 51st-largest spike on record “a good flush that’s happening today,” noting that the incredible bursts of volatility usually precede recoveries instead of recessions. Lee added that the market’s rush to hedge “is usually a sign of an interim low.”

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Instead of sounding bearish, Lee essentially framed the day’s drop as a shakeout inside an ongoing bull cycle spearheaded by breakthrough tech like AI, blockchain, along with a Fed pivot toward easing. 

Nevertheless, he kept one foot on the brake, saying that markets rarely bottom on Fridays, suggesting Monday, Oct. 13 could potentially bring the “flush” that resets positioning for another leg higher. 

Piper Sandler’s Craig Johnson says investors “were looking for an excuse to take profits”

Tom Lee was hinting at a soft landing for bulls. Craig Johnson, though, sounded like he’d already read the script. 

The Piper Sandler chief market technician told CNBC that Friday’s sell-off was more like profit-taking disguised as fear. “A lot of investors were looking for an excuse to take some profits,” he remarked, after checking in with traders on his Minneapolis desk, which he described as a relatively quiet tape with thinner volume.

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Johnson called the tariff-led drop more of an “overreaction,” which is consistent with usual shakeouts within bull markets. He pointed to a couple of technical flags, which include a steady slide in the number of stocks trading above their 40-week moving average, along wth a potential RSI break below 50 (triggers for short-term momentum selling).

Still, he feels that this isn’t the end of the rally. “This bull market is not over,” Johnson said, noting history shows fourth-year bull markets usually average a superb 12% gain. He expects the S&P 500 could potentially retrace to its 50-day or even 200-day averages before dip-buyers throw in their hats again.

He feels that the tariff drama is the needed pause that resets sentiment, not reverses it. Like Lee, Johnson sees buyers waiting in the wings, ready to load up once the dust settles.

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