Stocks cut losses but still finish August down

Stocks posted their second monthly decline of the year in August, though an end-of-the-month rally helped the S&P 500 cut its losses significantly.

Driving the news: The S&P 500 ended the month down 1.8%, it's still up 17.4% for the year.

• The Nasdaq Composite index dropped 2.2% in August, putting a small dent in an otherwise stellar year. It's up 34%.

Yes but: At its worst the S&P 500 was down nearly 5% during the month.

• At moments, the Nasdaq was down almost 8%.

How it works: Along came a series of sunny reports suggesting continued improvement in key drivers of inflation. That helped boost the spirits of investors who hope the Federal Reserve is done with rates hikes, which clobbered stocks last year.

By the numbers: Energy was the sole gainer of the S&P's 11 sectors in August, rising 1.3%, thanks to an increase in oil and natural gas prices.

• Utilities shares were the worst performing part of the market during the month — down 7% — suffering from both higher energy costs, and growing investor uneasiness about the exposure power companies have to seemingly random climate-related risks.
• Just look at Hawaiian Electric, in the aftermath of Maui's recent catastrophic fires, which was down more than 60% in August.

What we're watching: The ongoing dance among inflation data, economic growth — August jobs data is out Friday — and commentary from the Fed, all of which can call the tune for investors.