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:
- HR Software company Paycom (NYSE: PAYC) fell 4.1%. Is now the time to buy Paycom? Access our full analysis report here, it’s free.
- Design Software company Adobe (NASDAQ: ADBE) fell 4.1%. Is now the time to buy Adobe? Access our full analysis report here, it’s free.
- Customer Experience Software company Sprinklr (NYSE: CXM) fell 4.1%. Is now the time to buy Sprinklr? Access our full analysis report here, it’s free.
Zooming In On Paycom (PAYC)
Paycom’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 3.5% on the news that investors rotated from the high-multiple growth names that led the recent rally.
Software companies are priced on earnings projected years into the future, and the discount rate applied to those future cash flows is sensitive to both inflation expectations and the Federal Reserve's rate path.
The May import price data introduced the sharpest inflation surprise of the session: prices rose 1.9% against a 1.1% forecast, with an annual gain of 6.7%, the largest since August 2022. The data complicated the view that the Iran peace deal had cleanly resolved the inflation problem. Investors appeared to be rotating into cyclicals on falling oil and positioning cautiously ahead of new Chairman, Kevin Warsh's first Federal Reserve meeting later in the week.
The Bank of America fund manager survey added structural pressure. Portfolio managers cut allocations to tech stocks broadly, naming an AI bubble as the second-largest tail risk, cited by 28% of respondents.
SpaceX's announcement that it is acquiring AI coding platform Cursor for $60 billion also contributed unease: the deal absorbs one of the most closely watched independent AI development tools into a mega-cap infrastructure play, signalling that the most valuable AI software assets are being consolidated rather than remaining available as standalone platforms.
Paycom is down 18.8% since the beginning of the year, and at $123.80 per share, it is trading 48.8% below its 52-week high of $241.73 from June 2025. Investors who bought $1,000 worth of Paycom’s shares 5 years ago would now be looking at only $355.24.
ALSO WORTH WATCHING: Nvidia’s Quiet Partner. Nvidia’s chips cost a hundred grand. The connectors that make them work cost even more. One company makes them all.
Every AI server needs specialized infrastructure the chip companies don’t make. High-speed cables. Power connectors. Thermal sensors. This 90-year-old company built a monopoly on it. The AI boom just started. This stock is still flying under the radar. Claim The Stock Ticker Here for FREE.
