What Happened?
A number of stocks fell in the afternoon session after investors took profits following a significant rally the previous day.
Software stocks pulled back after one of the sharpest sector recoveries on record. The iShares Expanded Tech-Software ETF gained 15% across the prior three sessions — its best such run ever — while ServiceNow completed a nearly 40% rally in just four sessions from its April lows. With gains of that magnitude in that timeframe, profit-taking is the natural response.
The S&P 500 software and services sector fell approximately 3.78% on the day. Critically, the broader market provided no significant selling pressure as the S&P 500 was essentially flat, the Nasdaq barely changed, and the Dow edged marginally higher. This was sector-level digestion, not a broad risk-off move. Salesforce surrendered nearly half of the previous day's 10%-plus surge as worries about Anthropic's upcoming IPO and Google's $80 billion equity raise added pressure to the rerating. CrowdStrike slipped as pre-earnings caution set in ahead of the June 3 print — the stock rose approximately 70% year-to-date as options markets priced in a 9.5% swing on the result.
The sector's underlying thesis remained intact: the SaaSpocalypse narrative broke, and many names continued to trade well below their 52-week highs. The pullback was the market catching its breath before the next round of data, not reversing course.
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:
- Data Analytics company Domo (NASDAQ: DOMO) fell 8.3%. Is now the time to buy Domo? Access our full analysis report here, it’s free.
- Banking Software company Q2 Holdings (NYSE: QTWO) fell 7.8%. Is now the time to buy Q2 Holdings? Access our full analysis report here, it’s free.
- Advertising Software company The Trade Desk (NASDAQ: TTD) fell 8.3%. Is now the time to buy The Trade Desk? Access our full analysis report here, it’s free.
Zooming In On The Trade Desk (TTD)
The Trade Desk’s shares are very volatile and have had 28 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 11 days ago when the stock gained 3.1% on the news that Treasury yields cooled and risk-on rotation lifted AI-linked growth names, helping the sector recover from the previous day's Intuit-driven sell-off. SaaS companies (Salesforce, ServiceNow, Workday, Snowflake, MongoDB, Datadog) are the textbook example of long-duration cash flows: they earn revenue over multi-year contracts with high renewal rates, which makes them extremely sensitive to the discount rate. A ten-basis-point drop in the 10-year yield can lift SaaS valuations 5-10% by itself, because these stocks trade on EV/forward-revenue multiples that move directly with rates. The combination of cooling yields and Iran peace progress also calmed fears that AI commoditization (yesterday's Intuit thesis) is universal across SaaS. Investors appeared to be sifting the market for SaaS companies whose moats AI extends, a healthier setup than the previous day's blanket sell-off.
The Trade Desk is down 43.5% since the beginning of the year, and at $21.28 per share, it is trading 76.3% below its 52-week high of $89.76 from August 2025. Investors who bought $1,000 worth of The Trade Desk’s shares 5 years ago would now be looking at only $365.62.
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