Barring a sharp reversal, the U.S. stock market's five-month winning streak will come to an abrupt end in August. Fortunately, with the S&P 500 having advanced nearly 20% from November to July, this month's downturn may amount to a healthy pullback in a longer uptrend.

Several factors have contributed to the S&P's 5% month-to-date swoon. Stronger-than-expected economic data is raising expectations that the Federal Reserve will continue to raise interest rates. This is a bearish development for publicly traded domestic corporations, which are already on pace to report their largest quarterly profit decline since 2020. Soft economic data from China and other major economies also weighs on the market's risk appetite. 

August's downtrend has been broad-based with 10 of 11 sectors in the red. Interestingly, energy is the lone exception, a sector that historically ebbs and flows with the global economic outlook. Still, even crude oil prices pulled back on rate hike fears and China data last week. This year's biggest winners — technology and telecom — have especially fared poorly in recent weeks with investors taking profits amid renewed uncertainty.

Of course, there are exceptions. Approximately one of five S&P stocks have moved higher in August. The three largest outperformers are companies that are having a great 2023. Tacking on gains in a weak market makes them intriguing momentum plays to watch for the remainder of the year.

Which S&P 500 Stock Is Up the Most in August 2023? 

Eli Lilly and Company (NYSE: LLY) is up 20% this month and almost 50% for the year. The latest boost stemmed from the drug maker’s second-quarter financial report, highlighted by accelerating revenue growth and a 69% jump in earnings. Newly launched products, including diabetes treatment Mounjaro, were a big contributor. With Mounjaro, lymphoma medication Jaypirca and ulcerative colitis medicine Omvoh still in the early stages of commercialization, this bodes very well for Eli Lilly's future. 

Despite also progressing its diverse pipeline during the period, the company isn't resting on its laurels. Since the Q2 release, it has wrapped up three acquisitions that are expected to play a major role in the development of next-gen pharmaceuticals: 1) immunology specialist DICE Therapeutics, 2) Sigilon Therapeutics, which is developing a unique cell therapy for type 1 diabetes, and 3) Versanis Bio, whose lead candidate is in a phase 2b adult obesity study. The additions will enhance an already deep clinical pipeline that includes potential blockbuster donanemab, an early Alzheimer's disease drug that regulators are currently reviewing.

Why Is Arista Networks Holding Up So Well?

Arista Networks, Inc. (NYSE: ANET) is also up almost 50% year-to-date after advancing 16% in August. The cloud networking leader announced better-than-expected Q2 growth that showed data centers and corporate campuses are spending on technology despite the tepid economic backdrop. A newly launched AI-driven network identity service and new network-as-a-service (NaaS) offerings for healthcare organizations have given customers more reason to turn to Arista for their cloud transformations.

With almost 80% of S&P 500 companies beating consensus earnings expectations this quarter, several have gapped up on Q2 results. However, because of the market selloff, most have given up a significant portion of those gains. Arista is one of the exceptions. The stock has held firm since its high volume August 1st gapper — and as has happened multiple times this year, may be consolidating for the next leg up. 

This speaks to the market optimism around Arista. As the economic landscape improves, enterprises are likely to spend even more than the $2.9 billion they've spent on Arista's cloud networking ports and other solutions this year. The stock is trading near a record high; but if analysts' updated targets prove correct, it will reach $200 in the months ahead. 

Why Is GPN Outperforming PYPL and SQ?

Global Payments Inc. (NYSE: GPN) is another August 1st high-volume gapper that has managed to hang on to most of its gains. While Paypal, Square, Equifax and other industry peers have slumped, the financial payments and software provider is on the rise thanks to accelerating revenue growth, margin expansion and a newly completed acquisition. 

Second quarter revenue rose 7% compared to 5% in Q1 due to healthy demand from merchants and card issuers for payments technology and related software. And with operating margins forecast to expand by 1.2%, management is calling for 11% to 12% adjusted EPS growth in 2023. 

With most of the market's attention on Paypal and Square, Global Payments is quietly outperforming due to its minimal exposure to the consumer and stable book of financial services clients. As newly acquired payment tech integrations provider EVO Payments gets integrated, more offerings could lead to even faster growth. These are especially bullish developments for a stock that remains nearly $100 below its 2021 peak.