NEW YORK, Aug 30 (Reuters) -

A broadening rally in U.S. stocks is offering an encouraging

signal to investors worried about concentration in technology

shares, as markets await key jobs data and the Federal Reserve's

expected rate cuts in September.

As the market's fortunes keep rising and falling with big

tech stocks such as Nvidia ( NVDA ) and Apple ( AAPL ),

investors are also putting money in less-loved value stocks and

small caps, which are expected to benefit from lower interest

rates. The Fed is expected to kick off a rate-cutting cycle at

its monetary policy meeting on Sept. 17-18.

Many investors view the broadening trend, which picked up steam

last month before faltering during an early August sell-off, as

a healthy development in a market rally led by a cluster of

giant tech names. Chipmaker Nvidia, which has benefited from

bets on artificial intelligence, alone has accounted for roughly

a quarter of the S&P 500's year-to-date gain of 18.4%.

"No matter how you slice and dice it you have seen a pretty

meaningful broadening out and I think that has legs," said Liz

Ann Sonders, chief investment officer at Charles Schwab.

Value stocks are those of companies trading at a discount on

metrics like book value or price-to-earnings and include sectors

such as financials and industrials. Some investors believe

rallies in these sectors and small caps could go further if the

Fed cuts borrowing costs while the economy stays healthy.

The market's rotation has recently accelerated, with 61% of

stocks in the S&P 500 outperforming the index in the past

month, compared to 14% outperforming over the past year, Charles

Schwab data showed.

Meanwhile, the so-called Magnificent Seven group of tech giants

- which includes Nvidia ( NVDA ), Tesla and Microsoft ( MSFT ) -

have underperformed the other 493 stocks in the S&P 500 by 14

percentage points since the release of a weaker-than-expected

U.S. inflation report on July 11, according to an analysis by

BofA Global Research.

Stocks have also held up after an Nvidia ( NVDA ) forecast failed to meet

lofty investor expectations earlier this week, another sign that

investors may be looking beyond tech. The equal weight S&P 500

index, a proxy for the average stock, hit a fresh record this

week and is up around 10.5% year-to-date, narrowing its

performance gap with the S&P 500.

"When market breadth is improving, the message is that an

increasing number of stocks are rallying on expectations that

economic conditions will support earnings growth and

profitability," analysts at Ned David Research wrote.

Value stocks that have performed well this year include General

Electric ( GE ) and midstream energy company Targa Resources ( TRGP )

, which are up 70% and 68%, respectively. The small-cap

focused Russell 2000 index, meanwhile, is up 8.5% from its lows

of the month, though it has not breached its July peak.

The jobs report "tends to be one of the more market moving

releases in general, and right now it's going to get even more

attention than normal."

Investors are unlikely to turn their back on tech stocks,

particularly if volatility gives them a chance to buy on the

cheap, said Jason Alonzo, a portfolio manager with Harbor

Capital.

Technology stocks are expected to post above-market earnings

growth over every quarter through 2025, with third-quarter

earnings coming in at 15.3% compared with a 7.5% gain for the

S&P 500 as a whole, according to LSEG data.

"People will sometimes take a deep breath after a nice run

and look at other opportunities, but technology is still the

clearest driver of growth, particularly the AI theme which is

innocent until proven guilty," Alonzo said.

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