Salesforce's pop on Wednesday after reporting strong earnings and raised guidance is helping buoy the software sector overall. The bump comes amid the expectation of firmer-than-expected footing on software demand from Salesforce co-CEOs Marc Benioff and Keith Block.
Both execs highlighted "incredible demand" for SaaS solutions in their prepared remarks during the earnings call on Tuesday evening, which was readily received by market minds.
"Comments on the demand backdrop were positive, especially around customer-centric digital transformation enterprise projects," RBC Capital markets analyst Ross MacMillan wrote in his take on earnings. "We think this combo is both positive for Salesforce and an important signal from a software leader regarding overall demand trends."
So far, the market has picked up on this trend sending sector ETFs higher and even bolstering the stocks of competitors such SAP SE (SAP) - Get Report , Twilio (TWLO) - Get Report and Adobe Systems (ADBE) - Get Report .
At 3:25 ET, Adobe shares were up 7%, while Twilio soared 5.4%, far outpacing the recovery in the S&P.
The big rebound after Salesforce's earnings and comments will be a welcome bounce for the sector and stocks after many names, including Salesforce, have endured an inauspicious start to the fourth quarter of the calendar year.
"Management was clearly upbeat about the fundamental demand trends and secular nature of their product portfolio, as well as very positive overall customer feedback heading into 2019," Morgan Stanley analyst Keith Weiss said, helping explain the sector's rebound.
However, he voiced concern about the necessity of such a forecast.
"At the same time, we found it somewhat surprising to hear CEO Marc Benioff taking on the role of an economist and giving a GDP forecast, which investors may view as cautionary on the FY20 macro environment," Weiss added.
With more uncertainty ahead for the start of 2019 amid prospective tariff pressure, it will remain to be seen if the optimism on the seemingly secular sector is sustainable.
For the time being, even the macro situation looks better than expected as the Fed tempers its previously hike-happy stance.
A rising tide lifts all boats. With Fed Chair Powell's comments marking a relaxed tone from the Federal Reserve and Salesforce touting a strong demand environment, the sky is still blue for the cloud kings on Wednesday.
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