Stocks close lower but see 5th monthly gain in row

Stocks ended lower on Wall Street on Monday, but the market still closed out August with its fifth monthly gain in a row.

The S&P 500 fell 0.2% after spending much of the day wavering between gains and losses of less than 0.1%. The modest decline, which snapped the index’s sevenday winning streak, came as losses in financial, industrial and energy companies outweighed gains in technology stocks.

The benchmark index finished the month with a 7% gain, making it the S&P 500’s best August since 1986. It’s now up 8.3% this year. The Nasdaq composite, meanwhile, added to its recent string of milestones, closing at an all-time high.

The S&P 500 fell 7.70 points to 3,500.31. The Dow Jones Industrial Average lost 223.82 points, or 0.8%, to 28,430.05.

The Nasdaq rose 79.82 points, or 0.7%, to 11,775.46. The index, heavily weighted with tech stocks, has led the market’s rebound this year. It finished August with a 9.6% gain and it’s up 31.2% for the year. The Russell 2000 index of small company stocks fell 16.47 points, or 1%, to 1,561.88.

The market’s latest strong monthly finish extends a remarkable comeback for Wall Street since the coronavirus pandemic knocked financial markets into a steep skid and the global economy into recession.

Encouraging economic data as broad swaths of the economy have reopened this summer have helped stoke investor optimism about a recovery. The question is whether that’s going to be enough to keep the market moving higher when so much uncertainty remains about the pandemic’s lasting impact on companies and consumers.

“People need to be careful here because what we have is an exuberant rally sitting on the foundation of a shaky recovery,” said David Kelly, chief global strategist at JPMorgan Funds. He added that there will likely be a market correction “that brings us back down to Earth.”

Low interest rates and large amounts of bond purchases by the Federal Reserve have helped prop up the economy, and they’re a central reason the S&P 500 has been able to recover from its nearly 34% plunge earlier this year, even though the pandemic is still raging.

Congress has also offered unprecedented amounts of aid, though it has hit a seeming impasse in negotiations to re-up its assistance. Weekly benefits that it approved earlier for unemployed workers have run out, and investors say the economy desperately needs another lifeline from Capitol Hill to carry it through its current weakness.

Investors have been largely willing to look a few months or a year into the future, when it is hoped a vaccine for the new coronavirus will be available and helping the economy get back to normal. The market is also betting that corporate profits will rebound next year from their current coronavirus-caused hole.

Another factor that may weigh on the market is history. Since 1950, September has been, on average, the weakest month of the year for stocks, according to LPL Financial. And the last two times that the S&P 500 ended August ended with a gain of more than 5% it went on to lose all of those gains in September.

Monday was the first day of trading in the Dow since the 30-company average had its lineup of companies revamped. Salesforce.com, Amgen and Honeywell International are replacing Exxon Mobil, Pfizer and Raytheon Technologies. The shuffle was triggered by a 4-for-1 stock split in Dow member Apple. Tesla also had a 5-for1 stock split that took effect Monday. Apple was up 3.4%, while Tesla vaulted 12.6%.