What Happened?
A number of stocks jumped in the afternoon session after a soft Producer Price Index (PPI) print reassured investors, countering fears of an industry-wide budget squeeze sparked by IBM a day earlier.
June wholesale inflation fell 0.3% against expectations for a flat reading, layering on top of the previous session's surprisingly sharp 0.4% decline in consumer prices. This consecutive confirmation of cooling inflation shifted market focus away from IBM's warning that clients are engaged in "capex reprioritization"—exhausting their IT budgets to secure supply-constrained AI servers and high-bandwidth memory instead of software.
Lower inflation data directly reduces Treasury yields by taking pressure off the Federal Reserve to hold interest rates high. This provides a mechanical valuation lift to growth stocks, whose valuations rely heavily on future cash flows.
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:
- Project Management Software company Atlassian (NASDAQ: TEAM) jumped 3.5%. Is now the time to buy Atlassian? Access our full analysis report here, it’s free.
- Marketing Software company Sprout Social (NASDAQ: SPT) jumped 4.2%. Is now the time to buy Sprout Social? Access our full analysis report here, it’s free.
- Payments Software company Flywire (NASDAQ: FLYW) jumped 5.1%. Is now the time to buy Flywire? Access our full analysis report here, it’s free.
Zooming In On Flywire (FLYW)
Flywire’s shares are quite volatile and have had 15 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 7 days ago when the stock dropped 4.1% on the news that President Trump declared the Iran ceasefire "over" and threatened renewed strikes, sending oil higher and bond yields up in a session that punished high-multiple tech.
Software companies are quintessential long-duration growth stocks, valued on cash flows expected far into the future, which makes them acutely sensitive to interest rates. When a crude spike revives inflation fears and pushes government bond yields higher, as it did, the discount rate applied to those distant earnings rises and rich software valuations compress fastest.
The move was amplified by a risk-off rotation: with geopolitical tensions flaring, investors rotate out of the market's most expensive, momentum-driven corner and into energy and defensives. Though software has little direct exposure to oil as an input, its valuation math and its role as a funding source when investors de-risk make it a casualty of these shocks.
Flywire is up 35.4% since the beginning of the year, and at $18.82 per share, it has set a new 52-week high. Despite the year-to-date gain, investors who bought $1,000 worth of Flywire’s shares 5 years ago would now be looking at only $612.07.
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