What Happened?
A number of stocks fell in the afternoon session after the Federal Reserve held its benchmark rate at 3.5%–3.75%, unchanged since the central bank cut by three-quarters of a point in late 2025, and then delivered a dot plot that told investors the easing cycle underpinning the sector's re-rating might be over.
The median year-end rate estimate moved from 3.4% to 3.8%, removing any remaining expectation of a 2026 cut and introducing the possibility of a hike. Software companies are priced on earnings five to ten years into the future, and every basis point increase in the risk-free rate reduces the present value of those cash flows. The 2-year Treasury yield rose 11 basis points to 4.161% in the session. The late-2025 cuts had given software valuations room to expand; the FOMC outcome constricted that room.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Automation Software company Appian (NASDAQ: APPN) fell 3.6%. Is now the time to buy Appian? Access our full analysis report here, it’s free.
- Sales Software company ZoomInfo (NASDAQ: GTM) fell 3.6%. Is now the time to buy ZoomInfo? Access our full analysis report here, it’s free.
- Sales Software company Salesforce (NYSE: CRM) fell 3.7%. Is now the time to buy Salesforce? Access our full analysis report here, it’s free.
Zooming In On Salesforce (CRM)
Salesforce’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 1 month ago when the stock gained 2.9% on the news that investor confidence rebounded as markets softened their view on the existential threat AI poses to traditional software companies.
After a period of significant underperformance, dubbed the "SaaS Rout of 2026," where software stocks traded at a discount to the S&P 500, the prevailing fear that AI would completely disrupt and replace traditional Software-as-a-Service (SaaS) companies began to subside.
Experts noted that these companies possess significant advantages, including established enterprise relationships, vast amounts of proprietary data, and deep integration into customer workflows, which AI is unlikely to erase overnight. This changing perspective suggests a potential re-rating for the sector as investors realize these companies may be well-positioned to integrate and leverage AI rather than be replaced by it.
Salesforce is down 38.4% since the beginning of the year, and at $156.27 per share, it is trading 42.9% below its 52-week high of $273.65 from July 2025. Investors who bought $1,000 worth of Salesforce’s shares 5 years ago would now be looking at only $639.34.
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