The split between hardware and software was the most important detail in yesterday's rebound in U.S. stocks. The S&P 500 and Nasdaq Composite rose 0.5%. NVIDIA ($NVDA) gained 3.2%, the semiconductor ETF SMH ($SMH) rose nearly 1%, while the software-company ETF IGV ($IGV) fell 2.6%. Although the indexes turned green, not every part of technology moved in the same direction.

Macro pressure did not disappear either. Brent was at $95.26 this morning, WTI at $90.84, and the U.S. 10-year Treasury yield remained at 4.77%. With oil and Treasury yields both elevated, expensive growth stocks are being priced selectively despite strong company news. The key question today is whether the rebound in chips will spread to software.

At the previous close, technology, chips and software had all declined as oil and the U.S. 10-year Treasury yield rose. In the latest session, the Nasdaq Composite climbed to 26,217.83, SMH recovered to $550.48 and NVIDIA to $224.41. IGV fell to $103.42, below the previous day's close of $106.18. In other words, broad pressure on technology gave way to a clear hardware-software split.

Key takeaways

  • Market breadth improved: The Russell 2000 rose 1.1%, outperforming the large indexes. Weekly losses, however, have not yet been erased.
  • The labor market is losing momentum. ADP reported that private-sector employment rose by 38,000 in August, the slowest increase since January. The Fed's Beige Book showed that employment rose only modestly while input costs remained high.
  • Tunç Şatıroğlu (@tuncsatiroglu) views a break below the $106 line he had been watching for IGV as technical weakness. Yesterday's close was consistent with that warning; a lasting recovery first requires reclaiming $106, followed by $108.

What happened?

  • According to the Associated Press, the S&P 500 closed at 7,666.60, the Dow Jones at 53,061.95 and the Nasdaq Composite at 26,217.83. The Russell 2000's 1.1% rise showed that the rebound was not limited to megacap technology stocks.
  • NVIDIA's 3.2% rise and SMH's 0.96% gain showed that investors were putting more weight on hardware. IGV's 2.6% decline showed that software did not share that rise.
  • Brent closed at $95.63 in the previous session and slipped to $95.26 this morning. Holding around $95 shows that the U.S.-Iran conflict continues to feed into markets through energy, inflation and interest rates.

Market levels

Divergence within technology

  • The Nasdaq 100 ETF QQQ ($QQQ) is at $709.24. $705 is the first support level to watch; reclaiming $712 would strengthen the rebound, while $720 is the next resistance.
  • SMH is at $550.48. $545 is holding as support; a move above $560 would put the chip group's rebound on firmer footing, with $570 as the next resistance.
  • IGV is at $103.42, below the previous $106 line. $102.60 was the previous session's low and is nearby support; if this area is lost, selling pressure may persist. A turn in software is not confirmed until the main resistance levels at $106 and then $108 are reclaimed.
  • NVIDIA is at $224.41, just below the $225 threshold. The $220 support level is keeping momentum alive; a close above $225 followed by a break through the $227.95 resistance area would strengthen the signal.

Indexes and market breadth

  • The S&P 500 is at 7,666.60, above the 7,600 support line. Reclaiming 7,700 would strengthen the rebound; 7,750 is the next resistance area.
  • The Nasdaq Composite is at 26,217.83. 26,000 is the main support, 26,250 the short-term confirmation line and 26,650 the resistance area that must be cleared for a stronger continuation.
  • The Russell 2000 rose above 2,950 to 2,953.17. 2,900 is the main support; unless 3,000 resistance is cleared, the move may remain limited. A break below 2,900 would erase the improvement.

Oil and Treasury yields

  • Brent is at $95.26 and WTI at $90.84. Nearby support is $95 and $90, respectively; if $96 and $92 resistance are cleared, energy-driven pressure would intensify again. A move below support would be the first sign of relief.
  • The U.S. 10-year Treasury yield is at 4.77%, near the 4.80% decision zone. 4.60% is support, while 4.90% is the resistance and risk boundary for a harsher regime for growth stocks.

Red flags

  • If IGV falls below $102.60 while SMH and NVIDIA also lose $545 and $220, respectively, that would show that the divergence has turned into a broad technology selloff.
  • If Brent rises above $96 and the U.S. 10-year Treasury yield rises above 4.90%, the energy shock would no longer be a temporary headline and would point to more persistent valuation compression.
  • If Friday's employment data are weak while wage or input-cost pressure remains high, concerns about growth and inflation could strengthen at the same time.

Calendar

  • September 3, 3:30 p.m. TRT: Revisions to second-quarter U.S. productivity and labor costs. Markets will watch whether unit costs are adding to energy pressure.
  • September 4, 3:30 p.m. TRT: U.S. employment report for August. The question is whether the slowdown in ADP will show up in official payrolls.
  • September 10, 3:30 p.m. TRT: U.S. producer prices for August. This will show how energy and transportation costs pass through to producer prices.
  • September 11, 3:30 p.m. TRT: U.S. consumer prices and real earnings for August. The test is whether cost pressure is reaching consumers and weakening purchasing power.

My analysis

It would be incomplete to read yesterday's rise simply as “technology is back.” NVIDIA and SMH recovered, while IGV's sharp decline over the past two sessions shows that even within the AI theme, the winners are diverging. Hardware is drawing strength from demand for new capacity; software is facing tougher scrutiny over high multiples, competition and how defensible its business model is. That is why a rise in QQQ alone is not enough. IGV reclaiming $106 would be a cleaner signal of the quality of the rebound.

The macro backdrop remains decisive. With oil around $95 and the 10-year yield near 4.8%, long-duration cash flows are being valued lower. Add weak hiring in ADP and high input costs in the Beige Book, and the market is caught between “weak growth or persistent inflation?” If oil falls below $95, the 10-year yield drops to 4.60% and IGV reclaims $106, the technology rebound could broaden. Otherwise, strength in chips will remain a narrow form of leadership carrying the indexes.

The next two data points will test this view quickly. Today's productivity and labor-cost data will show the direction of cost pressure; Friday's official employment report will show the scope of ADP's slowdown. Market breadth will remain intact with the Russell 2000 above 2,950, and risk appetite will look more credible if the Nasdaq clears 26,250 and QQQ clears $712. Until these thresholds are reclaimed, we should not confuse a green day for the indexes with a lasting turn.

Sources

This is not investment advice; it is a research and monitoring note.