The market sell-off that began on Friday and deepened at the start of the week may have rattled Wall Street out of a summer lull, but some investors had been gearing up for a pullback in recent weeks. The Dow Jones Industrial average was on pace for its worse day since last October as a broad sell-off dragged down the major averages. In afternoon trading, all 30 stocks in the Dow Jones Industrial Average were negative for the session. However, strategists and professional investors had warned in recent weeks about the market's over-reliance on just a few large cap stocks and rising risks from Covid and inflation. Chris Osmond, the chief investment officer at Prime Capital Investment Advisors, said Monday there were signs under the surface that stocks were due for a pullback. "The market was building up to this, just given the narrowing breadth in the market that we've experienced over the last several weeks. And you also look at not only the breadth but where we've seen growth in the market," Osmond said, pointing to the strength in large cap tech over the past two months. More traditional defensive plays had also been gaining strength. JC O'Hara, chief market at technician at MKM Partners, pointed out in a note to clients that defensive plays had outperformed in recent days. "As the market jitters started to increase towards the back half of last week, the Low Volatility ETF, SPLV, broke to new highs. There was also relative improvement. It is too early to 'call' this a relative trend change, but it has our attention tactically," the MKM note said. Over the past two weeks, the S & P 500 has slipped 0.6%. Meanwhile, the Invesco S & P 500 Low Volatility ETF (SPLV) has gained 1.8% and the Utilities Sector SPDR Fund (XLU) has added 3.6%. Stocks in the health care sector, which some Wall Street pros see as a defensive play with strong near-term growth , have also outperformed. The biggest stocks in the utilities ETF have mostly underperformed the market this year, but several saw sizeable jumps in the last two weeks. For example, Duke Energy jumped more than 5% and NextEra rising 4.9% in that time period. In the low volatility index, notable moves over the last two weeks include a 6.9% gain for Oracle and a 4.1% climb for Coca-Cola . Both of those ETFs were down on Monday but still easily outperforming the broader market in recent weeks. At Prime Capital, Osmond said he had been adding positions in Big Tech in recent months and that real estate investment trusts looked attractive in this environment. "REITs offer a very unique yield profile, and a superior yield creation relative to fixed income right now as well as other equity sectors. What you also get is an inflationary hedge," Osmond said. The Vanguard Real Estate ETF , which tracks REITs, also outperformed the broader market over the past two weeks, rising 2.7%. -CNBC's Michael Bloom contributed to this report.
The Charging Bull, sometimes referred to as the Wall Street Bull, a bronze sculpture in the Financial District of Manhattan with a facemask in New York May 19, 2020.
TIMOTHY A. CLARY | AFP | Getty Images
The market sell-off that began on Friday and deepened at the start of the week may have rattled Wall Street out of a summer lull, but some investors had been gearing up for a pullback in recent weeks.