Stocks were rallying during midday trading, driven by the tech sector’s advances as investors eagerly await the quarterly earnings report from Nvidia Corp. (NASDAQ:NVDA), scheduled to be unveiled after the market close.

A backdrop of lower-than-anticipated Purchasing Managers’ Index (PMI) data and downward revisions in payroll projections, down by 306,000 for the year leading up to March 2023, has set the tone for the session, easing concerns about potential future rate hikes by the Federal Reserve.

Both Treasury yields and the dollar are trending downward, providing the long-awaited relief sought by the market. Notably, the 10-year Treasury yield has declined by 11 basis points, settling at 4.20%.

Cues From Wednesday’s Trading:

The S&P 500 surged 1%, while the Nasdaq 100 index soared 1.5%. Blue chips stocks in the Dow Jones Industrial Average edged 0.4% higher, while small caps in the Russell 2000 index rallied 1.1%.

US Index Performance On Wednesday

Analyst Color:

The current pullback could be limited in depth and duration, said LPL Financial Chief Technical Strategist Adam Turnquist. The analyst attributed the view to the lack of damage to the market depth amid the pullback and the composition of leadership underneath the surface.

“At a high level, while there has been some technical damage, it has not been severe, and overall breadth is holding up relatively well,” Turnquist said. The measure the analyst used to quantify market depth was the percentage of S&P 500 stocks trading above their longer-term 200-day moving average.

“The higher the percentage of stocks above their 200-dma, the more widespread the buying pressure is —implying the market's advance is likely sustainable,” he said.

The technical strategist noted that over half of the index was still holding up above its 200-DMA, with cyclical or more offensive sectors outperforming.

Chart Courtesy of LPL Financial

Wednesday’s Trading In Major US Equity ETFs

Latest Economic Data:

The S&P Global US Manufacturing PMI dipped from 49 in July to 47 in August 2023, falling short of market forecasts of 49.3.

The S&P Global US Services PMI fell from 52.3 the previous month to 51 in August 2023, falling short of market forecasts of 52.2 and reflecting the slowest growth in the U.S. services sector in six months.

Sales of new single-family houses increased by 4.4 percent to a seasonally adjusted annualized rate of 714,000, the highest level since February 2022 and exceeding the market consensus of 705,000.

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