S&P 500 on track to end best month since April

U.S. stock futures ticked higher Monday, signaling that the major equity benchmarks are on track to close out their best month since April.

Futures tied to the S&P 500 edged up 0.3%, suggesting that the gauge will extend its climb after the New York opening bell. Last week, the S&P 500 logged its strongest performance since early July, putting its gains so far in August at about 7.2%. Overseas, the pan-continental Stoxx Europe 600 rose 0.5%.

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Both the S&P 500 and the technology-heavy Nasdaq Composite notched all-time highs last week as the summer-vacation season began drawing to a close. Optimism was buoyed by a shift in the approach to monetary policy from the Federal Reserve, which has signaled that it is likely to keep U.S. borrowing costs down for an extended period.

“They’ve confirmed lower for longer rates as far as the eye can see,” said Richard Dunbar, head of multi asset research at Aberdeen Standard Investments. “Alongside that confirmation of cheap money and cheap discount rates, we’ve just come through a U.S. earnings season that’s been a lot better than feared.”

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Some investors are bracing for more volatility in September. U.S. lawmakers are scheduled to return to work following an August recess, and could resume talks to end the gridlock on a new coronavirus stimulus package as November election campaigns go into full swing. A failure by Congress to deliver additional relief measures for American consumers and businesses could weigh on market sentiment.

“There’s uncertainty about future support,” Mr. Dunbar said. “Investors are nervous generally, and keen to see support continue through low interest rates and fiscal policy. Any discussion of that being disrupted can make investors nervous.”

Going into the fall, the strength of the economic recovery may also be tested, investors warned, particularly if the number of new coronavirus infections in the U.S. and Europe increases and prompts fresh restrictions on business activity.

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“Basically for the U.S. market, we are at a key resistance level,” said Nadège Dufossé, head of cross-asset strategy and deputy global head of multiasset allocation at Candriam. “If the market continues to turn more positive, it will benefit value; European and emerging markets’ stocks will benefit as investors look beyond the U.S. for returns.”

Investors are braced for a surge in volatility stemming from any uncertainty or dispute about the results of the U.S. presidential election, or a sharp deterioration in relations between Beijing and Washington.

China on Friday unveiled new restrictions on artificial-intelligence technology exports that could further complicate the sale of TikTok’s U.S. operations, while intensifying the tech battle between the world’s two largest economies. The Shanghai Composite Index ended the day down 0.2%, while Hong Kong’s Hang Seng Index dropped almost 1%.

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Talks aimed at quickly completing a deal between the Chinese parent company of TikTok and suitors for the app’s U.S. operations slowed over the weekend following the restrictions.

Elsewhere in Asia, Japan’s Nikkei 225 stocks index rose 1.1%, up for the first time in four sessions, after Warren Buffett’s Berkshire Hathaway said it bought stakes in five of Japan’s top corporate names that have big investments in energy. Berkshire took stakes of slightly more than 5% in Mitsubishi Corp., Mitsui & Co., Sumitomo Corp., Itochu Corp. and Marubeni Corp., sending stocks in those companies surging. The five gained between 4.2% and 9.5%.

In bonds, the yield on the benchmark 10-year Treasury ticked down to 0.721%, from 0.727% Friday.

In commodities, Brent crude, the benchmark in international energy markets, rose 1.2% to $46.35 a barrel.

—Frances Yoon contributed to this article.

Write to Anna Isaac at anna.isaac@wsj.com