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U.S. stocks closed out a second consecutive quarter with sharp gains on Wednesday, but risks remain for stocks because the looming U.S. presidential election and mounting coronavirus cases could make investors cautious.

The S&P 500 rose 8.5% for the third quarter, although it fell 3.9% in September in its first monthly decline since March, when the coronavirus began its rapid spread across the United States.

Still, the benchmark index’s quarterly gain extended its nearly 20% rise in the second quarter, for its biggest two-quarter jump since 2009.

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Hopes for an economic recovery and historic stimulus from Washington and the Federal Reserve fueled the U.S. stock market’s rally following the coronavirus-driven crash in March. But stocks have struggled since the market peaked on Sept. 2, with September marked by a sell-off in heavyweight technology-related shares.

“Looking forward, what’s going to be absolutely critical as we enter the colder months and traditional flu season is, Are we going to see a significant spike in cases?” said Oliver Pursche, president and chief investment officer of Bronson Meadows Capital Management in Fairfield, Connecticut.

The Nasdaq composite index rose 11% in the third quarter, and registered its biggest two-quarter increase since 2000. The Dow Jones industrial average was up 7.6% for the quarter just ended.

MATERIALS LEAD IN SEPTEMBER

Strategists said many risks remain for stocks, including the pandemic, the Nov. 3 presidential election and the Supreme Court vacancy following Justice Ruth Bader Ginsburg’s death. Investors have worried that the election results will be uncertain or possibly not accepted.

“People are going into the end of the quarter with a bit of a wary, uncertain feeling,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “We not only have a still-unstable COVID pandemic situation, you have the uncertainty of the election.”

The S&P 500 materials sector outperformed and led gains among S&P sectors for September, while the most heavily weighted sector, technology, was among the weakest sectors for the month.

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For the quarter, consumer discretionary, materials and industrials were top performers along with technology, while energy was the only declining sector.

GROWTH WINS OVER VALUE FOR QUARTER

Investors have struggled to figure out where to invest, with many mega-cap tech stocks trading well above their long-term price-to-earnings ratios.

Value stocks continued a trend of underperforming growth names for the quarter. The Russell 1000 growth index was up about 13% for the period, while the Russell 1000 value index was up about 5%.

Stocks continued to look more attractive compared with bonds.

After tightening for most of the quarter, the spread between the S&P 500 dividend yield and the 10-year U.S. Treasuries yield began to widen in the last month.

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“The ‘value stocks’ - which is where the dividends are - have been underperforming,” Pursche said. “When you have underperformance in a sector that provides yields... you’re making it more attractive.”

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