Key Highlights

● Shopify rallied with no company-specific news, as softer Fed expectations lifted Growth Stocks broadly.

● Software peers Guidewire, Samsara, Braze and Tenable also rose on the same macro theme.

● Salesforce and HubSpot, by contrast, fell the same day, showing the rally was not universal.

Shopify jumped on Monday, Oct. 5, with no company-specific news, as softer Fed expectations lit a fire under growth stocks and pushed the Nasdaq-100 to a record close.

Growth stocks catch a bid

Shopify (NASDAQ:SHOP) rallied sharply on the Nasdaq-100 on Monday. No company-specific news, filing or analyst action was found to explain the move. Instead, the E-commerce software company rode a wave of buying in growth stocks.

Shopify provides the online storefronts, payments and tools that millions of merchants use to sell on the internet. Like many fast-growing software names, its valuation leans heavily on expected future profits, which makes it sensitive to shifts in interest-rate expectations.

On Monday, those expectations moved in Shopify's favor.

The jobs report effect

Friday's September jobs report was weak. Payrolls rose by just 29,000, and earlier months were revised lower. 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.

One market note explaining moves in a group of software stocks that included Shopify said "the latest employment figures signaled a gradual cooling in workforce demand." A cooler Job market can ease pressure on the Fed to keep tightening.

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

Shopify was not alone. Other software names including Asana, Guidewire Software (NYSE:GWRE), Samsara (NYSE:IOT), Braze (NASDAQ:BRZE) and Tenable (NASDAQ:TENB) also rose on the same macro theme. Engineering-software stocks got an extra lift from Schneider Electric's deal to buy PTC (NASDAQ:PTC) for $205 a share.

Still, the software rally was not universal. Salesforce (NYSE:CRM) slid on the Dow and HubSpot (NYSE:HUBS) fell after a downgrade from Raymond James.

Records despite high yields

The broader market finished strong. The Nasdaq-100 closed at a record 31,076.44, and the Nasdaq Composite jumped 286.45 points to a record 27,477.31. The S&P 500 climbed 51.23 points to 7,773.95, just shy of its summer record. The Dow rose 90.94 points to 51,267.90.

The rally came even as the 10-year Treasury Yield climbed to its highest level since 2002. Monday's ISM services survey showed its prices-paid index at 74.0, the highest since July 2022, rekindling Inflation worries.

Mega-cap AI names led the way, with Nvidia (NASDAQ:NVDA) closing at a record and Microsoft (NASDAQ:MSFT) rising after an upgrade from Melius Research.

The consumer link

Shopify's fortunes are closely tied to online shopping. Consumer discretionary stocks were trying to avoid a ninth straight weekly decline, and restaurant stocks were weak on Monday. Lower oil prices could offer some relief to shoppers. Brent settled at $100.32 a barrel and US crude slid to about $89.43 after G7 nations agreed to release emergency reserves.

Breadth was mixed. S&P 500 advancers outnumbered decliners by 1.7-to-1, but the Nasdaq posted 57 new highs against 243 new lows, a sign that the gains were far from universal.

For Shopify, the day was a reminder of how closely its shares track the market's view on interest rates.

What to watch

Rate expectations will remain the key swing Factor for growth stocks. Minutes from the Fed's September meeting are due Wednesday, Oct. 7 at 2 p.m. ET, and the Fed's next policy meeting runs Oct. 27 to 28.

Earnings season begins with PepsiCo on Thursday and Delta Air Lines on Friday, followed by the big banks from Oct. 13. For Shopify, the next company-specific catalyst is its next quarterly report.