It wasn't a big move, and nor did it last long, but it was enough to remind bulls that the market hasn't gone completely deaf to politics.
The Dow Jones Industrial Average erased about 160 points in 20 minutes and volume in the most widely traded S&P 500 futures tripled as a gut check landed on traders just after 11 a.m. in New York Tuesday. The catalyst was the release of emails by Donald Trump Jr. that said the Russian government backed his father's presidential campaign and was trying to damage Hillary Clinton.
For anyone paying attention it was the first tangible sign in weeks that the market remains subject to rough reversals when the topic of Donald Trump's political prospects is perceived to reach a critical mass. Such eruptions had been all but banished since revelations concerning former FBI Director James Comey sent the the Dow to a 373-point plunge on May 17 -- losses that were recouped in exactly a week.
"The more the market has to grapple with events with Washington, the more we'll see a situation where the market eventually breaks its will," said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. "The selloff is less than 50 basis points, we don't need to make a mountain out of a mole hill, but the market does signal that it pays a lot of attention to the news. It might take the market a few minutes to a few days to figure out how important the news is."
To be sure, Tuesday's damage was just a fraction of the May meltdown and pales in comparison to the shocks the market has suffered repeatedly since concern about technology company valuations surfaced June 9. The S&P 500 remains up more than 8 per cent in 2017 and just completed its best first half to any year since 2013.