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:

• Project Management Software company Asana (NYSE: ASAN) fell 3.8%. Is now the time to buy Asana? Access our full analysis report here, it’s free.
• HR Software company Paylocity (NASDAQ: PCTY) fell 3.8%. Is now the time to buy Paylocity? Access our full analysis report here, it’s free.
• Advertising Software company Zeta Global (NYSE: ZETA) fell 3.7%. Is now the time to buy Zeta Global? Access our full analysis report here, it’s free.

Zooming In On Paylocity (PCTY)

Paylocity’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 14 days ago when the stock dropped 3.5% on the news that software stocks declined for a second consecutive session, extending the profit-taking that began earlier in the week. 

The broader market was essentially flat when the correction started the previous day: the S&P 500 was unchanged, the Nasdaq barely moved, confirming this was sector-level digestion, not broad risk-off selling.

To understand the pullback, you need to understand the depth of what preceded it. In a 48-hour span in early February 2026, roughly $285 billion was wiped from software stock valuations after Anthropic's Claude Cowork platform raised genuine fears that AI agents could make per-seat SaaS licensing obsolete, a moment the market called the "SaaSpocalypse." Over the following months, the IGV fell more than a third from its September 2025 peak, hitting a 52-week low on April 10. At that point, approximately 75% of software stocks were screening as technically oversold. 

The recovery was fast. The IGV rose 21% in May alone, its best monthly performance since October 2001, and gained approximately 40-44% from the April low. By June 2, it had crossed back into positive YTD territory for the first time, sitting approximately 11% below its all-time peak. Strong results from Snowflake and MongoDB gave the rebound fundamental cover. But the final push was options- and retail-driven, not institutional. On June 2, call volumes in the IGV outpaced puts, and Oracle options saw billions in premium trade with a three-to-one call-to-put ratio. That is the key to understanding why portfolio managers are likely not defending these levels.

Most institutional managers who cut software exposure during the SaaSpocalypse would have faced a recovery that moved faster than their mandates allowed for rebuilding positions. Rather than chase, watching for a pullback and a better entry might be better. For those already positioned from the early recovery, the rational move was to let names reset before adding.

Paylocity is down 31.1% since the beginning of the year, and at $100.43 per share, it is trading 47.2% below its 52-week high of $190.36 from July 2025. Investors who bought $1,000 worth of Paylocity’s shares 5 years ago would now be looking at only $557.79.

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