On August 22, S&P Global released its preliminary PMI (Purchasing Managers' Index) report for August. The data showed that the U.S. composite PMI, on the other hand, fell slightly from 54.3 to 54.1, slightly better than analysts' expectations of 53.5.

The manufacturing PMI fell from 49.6 in July to 48.0 in August, below analysts' expectations of 49.6. The report showed an acceleration in the pace of decline in new orders and inventories, while factory production also fell for the first time in seven months. In contrast to the weakness in the manufacturing sector, the services PMI rose to 55.2 in August from 55.0 in July, beating market expectations of 54.0.

S&P Global commented, “The growth gap widened further, with the services sector expanding at a solid and accelerating pace, while manufacturing output declined at the fastest pace in 14 months.”

The U.S. Dollar Index tested the highs of the day after the PMI report was released. Traders focused on the better-than-expected composite PMI data, which suggested that the US economy remains in relatively good shape.

Meanwhile, gold prices retreated below $2,485 as traders focused on a stronger dollar and rising U.S. Treasury yields.

Market sentiment remained upbeat as the S&P 500 approached 5,635. Equity traders are betting that the Federal Reserve will begin to cut interest rates sharply, which will provide additional support to the major stock indexes.