Wild August finishes strong as S&P 500 climbs 2.3%

Key points

• After a rough start, the S&P 500 finished August up 2.3%.

• The Dow and Nasdaq also had gains in August, but small caps fell.

• September is off to a bad start as markets were tanking Tuesday.

August began with the worst crash of the year, but all but one of the major indexes ended the month up. And September is off to a similarly bad start.

The month of August is typically a slow one for stock markets, but this past August was anything but, as the S&P 500 and the other indexes were quite volatile.

The month began with the markets having their worst day in two years. On Monday, August 5, the Dow Jones Industrial Average plummeted 1,034 points, or 2.6% — and that was better than the others.

The S&P 500 dropped 160 points, or 3%, while the Nasdaq Composite fell 576 points, or 3.4%. The Russell 2000 was also down sharply, dropping 70 points, or 3.3%.

The selloff was due to several factors, including weak jobs and manufacturing data, suggesting the possibility of a recession, along with a move by Japan to hike interest rates.

But the markets did not stay down for long.

Markets rally after crash on good inflation reports, Powell speech

By the end of that week of the crash, the markets had erased much of the losses, as investors took the opportunity to buy on the dip. Still, all four major indexes were still down for the week.

After that, the S&P 500 had its best week of the year, rising 3.9% during the week of August 12. The Nasdaq was up 5.3%, while the Dow jumped 2.9%. That was the best week of the year for all three of those indexes. The Russell 200 was up 3.3%, but it was not its best week.

The indexes spiked mainly because of the July Consumer Price Index (CPI), which dropped for the fourth straight month and fell below 3% for the first time in more than three years, dipping to 2.9%.  Better than expected news on retail sales and consumer sentiment also contributed to the very good week.

The markets strung together two solid weeks after that, with the primary catalyst for the week of Aug. 19 being the address by Fed Chair Jerome Powell at the annual Jackson Hole Economic Symposium.

The speech was viewed by some as a victory lap of sorts for the Fed, as Powell talked about how the Fed was able to lower inflation and achieve a soft landing. He also stated that the “time has come for policy to adjust,” signaling that interest rate cuts are coming.

The good news continued in the last week of August as the July Personal Consumption Expenditures (PCE) index, released Aug. 30, remained at 2.5%, but core PCE fell to 2.6%. Both were better than expected.

S&P rises 2.3% in August

The average return for the S&P 500 in August, going back to 1928, is 0.6%. In August 2024, the S&P 500 returned 2.3%, finishing the month at 5,648. Year-to-date through Aug. 30, the S&P 500 is up 18.4%.

The Dow Jones Industrial Average also had a solid month, up 1.7% to close August at an all-time high of 41,563. The Dow is up 10.3% YTD.

The Nasdaq gained 0.6% in August, closing at 17,713. The Nasdaq has gained 18% through August.

The only major index to lose ground in August was the Russell 2000, which fell 1.6%. The Russell 2000 has returned 9.4% YTD through Aug. 30.

A difficult start to September

On the first full trading day of September, the markets were having a meltdown, particularly the Nasdaq, which was down 590 points, or 3.3%, as of 3:40 ET.

It may have had something to do with a weak manufacturing report, which, incidentally, drove down the markets roughly one month ago on August 5. It probably has more to do with an overpriced tech sector correcting.

The S&P 500 was down 133 points, or 2.4% on Tuesday, while the Dow was off 747 points, or 1.8% as of 3:40 p.m. ET. Further, the Russell 2000 was down 67%, or 3%, on Tuesday.

Will the early September crash lead to a stock market rally on Wednesday, similar to August?