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.

Next Friday's non-farm payrolls report could help

bolster the case for a broader market rally if it shows the

labor market is cooling at a steady, though not alarming pace,

said David Lefkowitz, head of U.S. Equities for UBS Global

Wealth Management.

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.