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The U.S. bond market has been sounding an alarm over the direction of the economy for weeks, and some investors are wondering whether stocks will follow suit as markets approach a late summer period that has historically been marked by volatility.

The benchmark S&P 500 index was down around 2% on Monday, with cyclical sectors such as energy stocks falling nearly 4.5%. At the same time, a flight to safety in the wake of growing expectations that the U.S. economic rebound will slow in the second half pushed 10-year Treasury yields, which move inversely to prices, to a five-month low of 1.18%.

Stocks are still near their record highs, and investors have been well-rewarded for buying dips during the S&P 500′s roughly 90% climb from its March 2020 lows. Still, some believe that worries over the spread of the COVID-19 Delta variant could give investors an excuse to take profits and spark a pullback.

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“The market has shown time and again that when things get really bad from a COVID standpoint, it really starts to struggle,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, noting stocks could be due for a 10% decline known as a correction.

Although equities had appeared placid in the face of the recent drop in yields, investors have noted rumblings under the surface. Among them has been the market’s narrowing breadth, with a handful of big growth names leading indexes higher while the typical stock languishes, which is a worrying sign, according to Morgan Stanley’s Michael Wilson, who said such scenarios usually end with a 10% to 20% correction.

In a note published on Monday, Wilson said market breadth is “the weakest we have ever witnessed,” with more S&P 500 stocks having hit 52-week lows than 52-week highs over the last month.

“We think it is foreshadowing a significant growth deceleration in earnings and the economy that may feel worse than most are expecting,” he wrote.

At the same time, stocks are primed to enter a late-summer period that has historically been marked by comparatively weaker performance. Since 1945, September has put up the worst monthly performance for the S&P 500, falling 0.56% on average, while August’s average flat performance has been the third-worst month, according to Sam Stovall, chief investment strategist at CFRA.

Some corners of the options market indicate investors are growing much more fearful of a sharp pullback than they have been in months, with demand for hedges against a big market drop rising sharply in recent weeks.

“Don’t forget that the S&P 500 hasn’t had a 5% correction since October, so you could say we are more than due for some turbulence,” Ryan Detrick, chief market strategist for LPL Financial, wrote on Monday.

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Still, some investors see the sell-off as a chance to add to positions after the recent market run-up that has the S&P 500 up about 13% for the year to date.

“Fear is ruling the day despite strong economic activity,” said Bryce Doty, senior portfolio manager at Sit Fixed Income Associates, in a note to investors. “We do not expect a return to complete shut-downs in the U.S., so while the damage from the Delta variant can be significant, we are still in the ‘buy the dip’ camp.”

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