Key Highlights

● Braze fell Friday as a broad selloff in software hit customer-engagement and marketing platforms.

● The move was part of a wider software retreat rather than a company announcement.

● The consumer sentiment index fell 5.3 points to 45.2, its lowest since October 2011.

● Meta Platforms reports Oct 21, Twilio Oct 29; Michigan sentiment follows Oct 23.

Lower with the group

Braze (NASDAQ:BRZE), whose platform helps brands send personalized messages to customers across email, mobile apps and other channels, fell on Friday. Market commentary said the stock traded with the sector and pointed to no company-specific news. It placed Braze in a roundup of software shares that plummeted, alongside Samsara (NYSE:IOT), HubSpot (NYSE:HUBS) and Asana (NYSE:ASAN).

HubSpot, a marketing and sales software provider, fell. Samsara dropped to $39.36, and Asana declined as well. Braze went public in 2021 and counts consumer brands among its customers. The Russell 2000 company's move was part of the wider retreat from software rather than a reaction to any announcement from Braze.

Customer-engagement software sits at the intersection of two themes investors have been weighing: corporate marketing budgets, which can be sensitive to economic conditions, and the potential for artificial intelligence to reshape how marketing messages are created and delivered.

Why software sold off

Software stocks came under heavy pressure in the afternoon. In a 45-stock software basket, 41 fell, erasing roughly $130 billion in market value. Twilio (NYSE:TWLO), a communications-platform company, tumbled after reversing early gains, with one report citing profit-taking after its S&P 500 inclusion along with valuation concerns. Snowflake (NYSE:SNOW) tumbled and Datadog (NASDAQ:DDOG) slid.

The selloff stemmed from a change in how investors approach the AI trade. According to market commentary, the question moved from what AI can do to how it will be financed, with debt-funded infrastructure names hit hardest. Goldman Sachs described hedge-fund selling as a "tactical rotation" away from smaller AI names, per a published report.

Consumer data added another layer. The Primary Consumer Sentiment Index fell 5.3 points to 45.2, its lowest since October 2011, according to market data, which weighed on consumer-facing companies that are often customers of marketing platforms.

Broad market slide

The Russell 2000 fell 45.90 points to about 2,721, according to market data, after opening higher; another report put the close at 2,719.57. The S&P 500 lost 84.62 points to 7,659.44, the Nasdaq Composite dropped 572.99 points to 26,140.03 and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41.

The 10-year Treasury yield ended near 5.1, per market data, keeping pressure on growth stocks. A Franklin Templeton Institute investment strategist said that "pressure across the long end of the curve acts as a valuation headwind for risk assets." Investors rotated into energy, utilities, staples and health care, and the Cboe Volatility Index rose 3.53 points to 19.99.

Braze Awaits Meta Ad-Demand Read

The University of Michigan consumer sentiment survey is due Friday, Oct 23, a follow-up to the weak consumer sentiment reading. The Federal Reserve's next decision is on Oct 28; Chair Kevin Warsh said, "I don't prejudge meetings." The personal consumption expenditures price index and the first estimate of third-quarter GDP follow on Oct 29. Futures still price roughly one quarter-point hike by December, while Bank of America continues to expect a move in October.

Next week brings earnings that could shape sentiment toward marketing and engagement software, and Twilio reports on Oct 29. Meta Platforms (NASDAQ:META) reports after the close on Wednesday, Oct 21, offering a read on digital-advertising demand, and IBM (NYSE:IBM) and SAP (NYSE:SAP) report the same evening.