A wobbly day on Wall Street ended Tuesday with major indices slipping just below recent all-time highs, but the S&P 500 closed August solidly in the green with its seventh consecutive monthly gain.
Investors are busy trying to determine the impact that increasing COVID-19 cases will have on the still recovering economy. The market was choppy amid a mix of economic data, some of which signaled consumers are becoming more cautious.
“The market is always grappling with the question of what direction are we going,” said Rob Haworth, senior investment strategist at US Bank Wealth Management.
Investors are assessing which areas of the market are expected to benefit in the coming months, as supply constraints continue to hamper some industries as COVID-19 continues to threaten economic recovery, he said. Uncertainty has helped shift gains and losses to service-oriented sectors and other areas of the economy that generally do well in a growing economy.
The S&P 500 Index lost 6.11 points, or 0.1%, to 4,522.68, after setting a record the day before. The Dow Jones Industrial Average fell 39.11 points, or 0.1%, to 35,360.73 and the Nasdaq slipped 6.65 points, or less than 0.1%, to 15,259.24.
Technology stocks were the biggest weight, pushing the benchmark S&P 500 down, despite more stocks rising than falling in the index. Smaller company stocks outperformed the market as a whole, indicating that investors were somewhat confident about continued economic growth. The Russell 2000 gained 7.78 points, or 0.3%, to 2,273.77.
Despite the turmoil, the S&P 500 advanced until August for a gain of 2.9%. This represents seven consecutive monthly gains, the longest such streak since the start of 2018. The Nasdaq ended the month with a gain of 4%.
The market was boosted by a number of factors this month. Corporate profits have been much better than expected, giving investors the confidence to pay higher prices for an already high market. Additionally, the Federal Reserve has made it clear that it believes inflation will be temporary and that any withdrawal of central bank financial support will be gradual.
Energy prices mostly fell for a second day as fears of widespread devastation to U.S. oil and gas production in the Gulf of Mexico after Hurricane Ida appeared to be overblown. Oil companies have started gradually restarting refineries in Louisiana, and Colonial Pipeline said it has restored flows from several pipelines crossing the south. Oil prices fell 1%, while natural gas prices rose 1.7%.
The latest economic data has once again shown the impact of the delta variant of the coronavirus on the economy. Consumer confidence in August fell sharply to 113.8 from 125.1 in July. Economists were expecting a reading of 124.0. Most of the drop was linked to the spread of the virus over the past month, which has flooded hospitals with patients and deaths are rising again.
The weakness of the report weighed on some companies, such as apparel and apparel manufacturers, which rely on discretionary consumer spending. Under Armor fell 4.1%. Tapestry, which owns Coach and Kate Spade, fell 2.3%
Investors’ eyes will be on key economic data later this week, when the Labor Department releases its August jobs report on Friday. Economists expect US employers to have created 750,000 jobs last month, according to FactSet, with the unemployment rate falling to 5.2%.
The bond market was calm, with the 10-year Treasury bill trading at a yield of 1.30%. This is up from 1.28% the day before.