What Happened?
A number of stocks jumped in the afternoon session after sentiment improved as the broader market rallied on Iran peace deal progress and cooling Treasury yields.
IT services firms (Accenture, Cognizant, Infosys, EPAM, IBM Consulting) sell project-based digital transformation work: the kind of multi-year engagements that get green-lit only when corporate customers feel confident about the macro environment. Generative AI added a new structural layer to the trade.
Every Fortune 500 CIO is racing to implement AI agents and rewrite the automation playbook, and these firms are the ones getting paid to do the implementation. The macro tailwind compounds the AI tailwind: lower yields raise the present value of multi-year contracts, while AI adoption increases the size and urgency of those contracts. That dual mechanism was what the day’s tape priced in.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
Zooming In On DXC (DXC)
DXC’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock dropped 26.5% on the news that the company reported mixed first-quarter 2026 results overshadowed by a gloomy outlook for both the upcoming quarter and the full year.
In its first quarter, DXC’s revenue fell 1.2% year-over-year to $3.13 billion, meeting Wall Street’s expectations. The company also posted an adjusted earnings per share (EPS) of $0.77, which was a 9.5% beat against analyst estimates.
However, investor sentiment soured on the company’s forward guidance. DXC’s revenue forecast for the second quarter of $2.99 billion came in 3.3% below consensus. Furthermore, its adjusted EPS guidance for the full fiscal year 2027 of $2.65 at the midpoint missed analyst expectations by a significant 19.2%, signaling continued headwinds.
DXC is down 32.4% since the beginning of the year, and at $9.53 per share, it is trading 41.3% below its 52-week high of $16.24 from July 2025. Investors who bought $1,000 worth of DXC’s shares 5 years ago would now be looking at only $255.16.