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Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on July 5, 2017 in New York.

BRYAN R. SMITH/AFP/Getty Images

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.

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"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, today'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 was little changed as of 3:10 p.m. in New York and remains up more than 8 percent in 2017 and just completed its best first half to any year since 2013.

"If the Trump administration is impaired it lowers odds of significant tax reform, but it's not clear to me that is reflected very much in the current price," said George Pearkes, a macro strategist with Bespoke Investment Group LLC. "So I wouldn't read into it as what happens next. Way too many possible outcomes and permutations."

A fact that has confounded bears has been the market's propensity to skate along at high valuations while volatility remains low. The S&P 500 has gained 13 percent since Election Day while the CBOE Volatility Index has averaged 11.9, a little more than half its historical average.

The S&P 500 sits at the highest valuation since the financial crisis and U.S. stocks overall look a whole lot more like a late-stage bull rally than a market grappling with an oncoming upheaval in Washington. The equity benchmark trades at a multiple of 21.5, compared with a valuation above 30 during the dot-com ear and an average 19.6 in the past 20 years.

That's not to say there isn't a point at which the crisis enveloping the White House won't spark lasting turmoil in financial markets. For now, investors attention will remain on Federal Reserve Chair Janet Yellen's coming testimony to Congress and the start of the corporate earnings season.

"If it spirals out of control to be a Watergate type scandal then all bets are off on new policy but if there was a smoking gun it feels like it would be out already," said George Schultze, founder and managing member Schultze Asset Management in New York. "Maybe some people trade on this speculation but I think the bigger drivers of the market are valuations, where interest rates are and where they're going -- that's more relevant than whether Trump Jr. released emails and met with a lawyer. It seems like noise."

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