What Happened?
A number of stocks fell in the afternoon session as 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.
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:
- Marketing Software company Upland Software (NASDAQ: UPLD) fell 8%. Is now the time to buy Upland Software? Access our full analysis report here, it’s free.
- Content Delivery company Fastly (NASDAQ: FSLY) fell 6.1%. Is now the time to buy Fastly? Access our full analysis report here, it’s free.
- Data Analytics company Strategy (NASDAQ: MSTR) fell 5%. Is now the time to buy Strategy? Access our full analysis report here, it’s free.
Zooming In On Upland Software (UPLD)
Upland Software’s shares are extremely volatile and have had 69 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 dropped 12.7% on the news that a stronger-than-expected jobs report signaled that the Federal Reserve may keep interest rates higher for longer.
The U.S. economy added 172,000 nonfarm payroll jobs in May, significantly surpassing economists' expectations of around 85,000, while the unemployment rate held steady at 4.3%. This robust labor market data eases concerns of an economic slowdown but diminishes the likelihood of near-term interest rate cuts by the Federal Reserve. A prolonged high-interest-rate environment can create headwinds for growth-oriented sectors like technology, as it pressures stock valuations by making future earnings less valuable in the present. As a result, investors recalibrated their expectations for a 'higher-for-longer' rate scenario.
Upland Software is down 59.5% since the beginning of the year, and at $0.61 per share, it is trading 79.5% below its 52-week high of $2.96 from August 2025. Investors who bought $1,000 worth of Upland Software’s shares 5 years ago would now be looking at only $14.36.
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