ServiceNow shares advanced 3.1% to $103.87 in extended trading Monday, spearheading a rebound across the software sector that has faced significant pressure in recent months. The S&P 500 software services index gained 2.9%, while the broader technology sector rose 1.6%.
Oversold Conditions Fuel Recovery
The rally comes after software stocks have been battered since late October, with ServiceNow and AppLovin both down more than 40% during that period. Keith Lerner, Chief Investment Officer at Truist Advisory Services, characterized the market as "sharply oversold where a little bit of good news can go a long way." Oracle's post-upgrade momentum helped fuel broader optimism.
Positioning and Skepticism
ServiceNow's gains occurred without any company-specific announcements, suggesting the move reflects positioning shifts rather than fundamental news. While some investors argue the selloff moved too quickly for profitable enterprise platforms, skepticism persists about whether the worst is over for the sector.
Options markets continue to price in elevated volatility, with implied volatility for the iShares Expanded Tech-Software Sector ETF holding near 41%. Short interest in the ETF remains substantial at approximately 19% of free float, according to Ortex Technologies data reported by Reuters.
Economic Data in Focus
Traders are now turning their attention to critical economic indicators that could influence Federal Reserve policy. The January U.S. payrolls report arrives Wednesday, followed by consumer price index data on Friday. Stronger-than-expected inflation or employment numbers could push back rate-cut expectations, potentially pressuring high-multiple software stocks.
Additional concerns about competition from AI-driven rivals continue to weigh on the sector. The coming sessions will test whether Monday's recovery can maintain momentum ahead of these key economic releases.
