Key Highlights

● Salesforce finished as the second-worst performer in the Dow, with no company-specific news behind the drop.

● Software names broadly struggled as the 10-year Treasury Yield rose to its highest level since 2002.

● The Dow lagged a record-setting Nasdaq, adding just 90.94 points to 51,267.90.

Salesforce slid on Monday, Oct. 5, finishing near the bottom of the Dow as software stocks buckled under climbing Treasury yields, even while the Nasdaq powered to a record.

Second-worst on the Dow, with no headline to blame

Salesforce (NYSE:CRM) slid on Monday and finished as the second-worst performer in the Dow Jones Industrial Average. No company-specific news, filing or analyst action was found to explain the drop.

Instead, the selling fit a wider pattern. Software names struggled as long-dated Treasury yields kept marching higher, with the 10-year yield rising to its highest level since 2002. For companies valued on profits expected years from now, higher yields make those future Earnings look less valuable today, and that math tends to hit software hardest.

Salesforce, which sells customer-relationship software to businesses around the world, sits squarely in that group. Monday's slide put it alongside Merck and Johnson & Johnson at the foot of the Blue-Chip index.

A market that split in two

The irony is that Monday was a strong day for technology overall. The Nasdaq Composite jumped 286.45 points to a record 27,477.31, and the Nasdaq-100 also closed at a fresh high of 31,076.44. The S&P 500 added 51.23 points to 7,773.95, just shy of its summer record.

The Dow lagged. It crept up only 90.94 points to 51,267.90 and spent much of the morning in negative territory. Breadth was also patchy on the Nasdaq, where mega-cap AI names did the heavy lifting.

Nvidia (NASDAQ:NVDA) rose to a record close and Microsoft (NASDAQ:MSFT) gained after an analyst upgrade, showing that investors were still willing to pay up for the biggest AI winners. Many other software names did not get the same treatment.

Why yields matter so much right now

The Bond Market sent mixed signals. Friday's September jobs report was weak, with payrolls rising by just 29,000, and that cut bets on another Federal Reserve rate hike in October. Traders now see roughly a one-in-four or smaller chance of an October hike, down from better than even a week ago.

Yet long-dated yields still climbed. The ISM services survey released on Monday showed its prices-paid gauge at 74.0, the highest since July 2022, reviving Inflation worries. Heavy federal borrowing and a Global Bond selloff led by France's fiscal troubles added to the pressure.

Daniela Hathorn, senior market analyst at Capital.com, summed up the tension: "growth stocks are rallying because Fed expectations have softened, while the Risk-Free Rate against which those valuations are judged remains exceptionally high."

That push and pull helped some growth names on Monday. Salesforce ended up on the wrong side of it.

Oil, Brazil and the rest of the tape

Elsewhere, oil fell even as the Strait of Hormuz stayed effectively closed. Brent settled at $100.32 a barrel and US crude fell to about $89.43, after G7 nations agreed to release 100 million barrels from emergency reserves.

Brazil stole the international spotlight. Brazilian stocks and US-listed Brazilian shares soared after Senator Flávio Bolsonaro edged ahead of President Lula in the first round of the presidential vote, setting up an Oct. 25 runoff.

Health care was the weakest sector for much of the day, with Merck, Bristol-Myers Squibb (NYSE:BMY) and Johnson & Johnson (NYSE:JNJ) all lower, which helped explain the Dow's sluggish showing.

What to watch

The next big test for software valuations is the bond market. Minutes from the Fed's September meeting are due on Wednesday, Oct. 7 at 2 p.m. ET, and investors will comb them for clues on how many more hikes officials expect.

The Fed's next policy meeting runs Oct. 27 to 28. Earnings season also kicks off in earnest with PepsiCo on Thursday, Delta Air Lines on Friday and the big banks from Oct. 13. For Salesforce itself, the next clear catalyst is the company's next quarterly report.