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Why Salesforce Stock Rallied Over 2% Today

What happened

Shares of "digital transformation" software leader Salesforce (NYSE: CRM) were up 2.3% today as of 12:55 p.m. ET. That compares with a flat day for the S&P 500 index and a 1.7% gain for the Nasdaq Composite.

So what

Software stocks have been absolutely hammered so far in 2022 as the market punishes high-growth but richly valued companies. Salesforce has been no exception. Even after today's small bounce, shares are down 32% on the year and 47% off of all-time highs reached in late 2021.

Helping Salesforce outperform today is a deteriorating 10-year Treasury yield. Though the U.S. Federal Reserve is hiking interest rates, the market is now fearful that a recession is all but unavoidable -- thus lowering rates, at least for the time being. Lower interest rates increase the present value of risk assets like stocks, especially growth stocks like Salesforce.

Now what

Is this a turning point for the most beaten-down stocks? Perhaps. Skyrocketing oil and energy prices were one of the last remnants of strength for the market, but recession talk has that cyclical sector in reverse today as well. It seems that high prices are beginning to affect consumer behavior, paving the way for demand destruction and perhaps some relief for inflation.

But what's all this to Salesforce? In tough economic times, organizations look for ways to cut costs and focus on projects with a quick turnaround time on positive investment return. Pouring money into cloud computing -- which can increase company efficiency and lower long-term expenses -- is just such a project. A leader in cloud-based software solutions, demand for Salesforce's products remains strong right now.

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Nicholas Rossolillo and his clients have positions in Salesforce, Inc. The Motley Fool has positions in and recommends Salesforce, Inc. The Motley Fool has a disclosure policy.


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