While the S&P boasted its steepest August percentage gain in more than three decades it ended Monday slightly lower and the Dow also lost ground as investors took a pause although the Nasdaq closed higher thanks to high-flying stocks including Apple Inc.
The Federal Reserve's commitment to tolerate inflation and keep interest rates low, positive developments in vaccines and treatments for COVID-19 and a rally in tech-focused stocks have helped the S&P 500 and Nasdaq hit record highs in August.
But while some states continued to ease restrictions Monday, investors noted that across the United States, total coronavirus cases topped 6 million Sunday as many states in the Midwest reported increasing infections, according to a Reuters tally.
"It's a momentum trade. People are flooding to the technology companies they think will do well regardless of the pandemic," said Chris Zaccarelli, chief investment officer, Independent Advisor Alliance.
'Pandemic is here to stay'
"The U.S. just passed 6 million cases, a further reminder that the pandemic is here to stay until we do something about it. Clearly it has an impact on all businesses, but some are more pandemic resistant," he said.
The Dow Jones Industrial Average fell 223.82 points, or 0.78%, to close at 28,430.05, the S&P 500 lost 7.7 points, or 0.22%, to 3,500.31 and the Nasdaq Composite added 79.82 points, or 0.68%, to 11,775.46.
Technology, then health care and utilities stocks were the biggest percentage gainers among the 11 major SP sectors while energy was the biggest percentage decliner.
Investors show caution
With the S&P reaching 3.8% above its pre-crisis record during the session, Mona Mahajan, senior U.S. investment strategist at Allianz Global Investors in New York, said investors were showing some caution by favoring technology as they looked warily at U.S. and overseas COVID-19 numbers.
"After such a strong summer run, we're reverting back to the old pandemic playbook. So we see tech outperforming," she said. "Really that's a defensive move as people think about stay-at-home more as we're heading toward that fall season."
The Nasdaq, meanwhile, ended the day almost 20% above its pre-crisis record closing high. Its top two boosts for Monday were from Apple Inc and Tesla Inc after their stock splits.
While the splits did not provide a fundamental reason to buy the stocks, Mahajan noted that the lower prices may be making the momentum stocks more attractive to some retail investors.
For the month the S&P showed a gain of 7.01%, its biggest advance for August since 1986 when it rose 7.1% that month.
Three main indexes on rise
The three main indexes showed their fifth straight monthly rise following March lows, even as economic data pointed to an uneven recovery from the steep downturn.
For the S&P, this was its longest winning streak on a monthly basis since a six-month run from April to September 2018.
And the benchmark's 35.6% gain since April marked the strongest five-month run for the S&P since 1938, according to data from Bespoke Investment Group.