U.S. stocks went on a wild ride Tuesday as traders debated the impact of emails released by Donald Trump Jr.
The Dow Jones industrial average (Dow Jones Global Indexes: .DJI) initially fell 100 points on concerns the Russia controversy that's plagued President Donald Trump's presidency will worsen.
The email chain that led to the controversial meeting with a Russian lawyer offered "high level and sensitive information" that would incriminate Hillary Clinton as part of the Russian government's support for his father's presidential campaign.
"Each time something like this happens it gets you further away from policy reform", said Ian Winer, head of equities at Wedbush. "The emails that Donald Trump Jr. posted to Twitter which confirms he was being told the Russian government was supporting his dad and they had damaging emails on Hillary and he was very excited to meet with them. Bottom line is I think it's just one more headline and helps support this negative narrative with ... the Russians."
The U.S. dollar (STOXX: .DXY) fell and hit its weakest level on the day against the euro (Exchange: EUR=). Gold futures spiked, while Treasury yields edged lower.
However, the major stock indexes recovered. The Nasdaq composite closed 0.3 percent higher at 6,193.30. The Dow closed just above breakeven at 21,409.07, up 0.55 points.
"People just got spooked by that. Selling begot more selling," said Jeremy Klein, chief market strategist at FBN Securities. "This isn't anything we didn't know."
Dow Jones industrial average Tuesday intraday performance
Strategists noted market moves were likely exaggerated due to the summer season's lighter trade volumes. Traders also awaited Fed Chair Janet Yellen's testimony scheduled for Wednesday.
Advancers led decliners on the New York Stock Exchange, with an exchange volume of 774.77 million and a composite volume of 3.04 billion at the close.
Financials led decliners on the S&P 500, which closed 0.1 percent lower at 2,425.53 . Boeing (NYSE: BA) contributed the most to gains in the Dow, while 3M (NYSE: MMM) was among those with the greatest negative impact.
Equities had posted slight gains earlier in the session, but they were capped by worries of higher interest rates around the world.
Treasury yields have risen sharply over the past month amid hawkish central-bank rhetoric. In that time period, the benchmark 10-year note yield has climbed to around 2.38 percent from approximately 2.2 percent.
Similar moves have transpired in European bonds. The 10-year German bund yield has jumped to 0.55 percent from around 0.25 percent in the past month.
Stocks, meanwhile, have remained in a range in the past month, with the S&P 500 falling just 0.18 percent.
"[L]eadership continues to reflect an environment suggestive of higher rates and a risk-seeking attitude," said Chris Verrone, head of technical analysis at Strategas Research Partners, in a note Tuesday. "Continued outperformance from groups like Banks, Capital Markets, Transportation, Machinery, and Homebuilders underscore this on the positive side. Conversely, many of the bond proxies have continued to deteriorate in both absolute and relative terms."
"If stock prices discount expectation vs. reality, the market is likely telling us that the high-water mark in central bank policy has likely been seen," he said.
Fed Governor Lael Brainard said in a speech Tuesday the central bank will likely act "soon" to begin reducing its $4.5 trillion balance sheet, as long as the economy cooperates. However, she said the Fed may "not have much more" to do in terms of rate hikes.
Minneapolis Fed President Neel Kashkari said separately that U.S. banks are still too big to fail. The speeches will lead up to Yellen's testimony Wednesday.
"Investors have priced in an almost perfect environment for stocks," said Anthony Conroy, president at Abel Noser. "That's why we're at 21,000 on the Dow." "What's not priced in is tighter monetary policy."
The Fed has raised rates twice this year and is expected to hike once more before 2017 ends. The central bank has also signaled its desire to start unwinding its massive $4.5 trillion balance sheet.
In economic news, the National Federation of Independent Business (NFIB) small business optimism index slipped to 103.6 in June from 104.5 in May. Wholesale inventories rose 0.4 percent in May, marking their biggest gain in five months. Meanwhile, job openings decreased to 5.7 million in May, the Labor Department said.
In corporate news, Amazon.com (NASDAQ: AMZN) held its annual Prime Day, which features big deals for Amazon's Prime customers.
Wall Street also geared up for the start of earnings season. JPMorgan Chase, Wells Fargo and Citigroup are among the companies set to report later this week.
Overall, S&P 500 second-quarter earnings are expected to rise 6.2 percent year over year, according to S&P Capital IQ. But the key for investors will be the companies' guidance, said Nick Raich, CEO of The Earnings Scout.
"What's (likely) going to happen is, for the 25th consecutive quarter, companies will lower their estimates," he said. "That's not going to be the bearish news; that will be by how much."
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