Fake tweet shakes markets, but stocks manage a gain
New York • Hackers compromised Twitter accounts of The Associated Press on Tuesday, sending out a false tweet about an attack at the White House and briefly sending the Dow Jones Industrial Average sharply lower amid a flurry of trading activity.
The markets managed to close higher even after they were shaken at 1:08 p.m. Eastern when the fake tweet at @AP prompted a sudden sell-off. A posting saying that there had been two explosions at the White House and that President Barack Obama had been injured immediately sent the Dow down 143 points, from 14,697 to 14,554. The AP said its Twitter account had been hacked and the posting was fake.
Within five minutes the Dow had snapped back. White House Press Secretary Jay Carney said, "the President is fine" despite what the hacked Twitter feed said.
However, the market impact was already intense. On the floor at the Chicago Mercantile Exchange, traders quickly traded on the tweet, selling S&P futures and buying Treasury 10-year futures. For several minutes, the floor was a flurry of activity, as it was in trading rooms across Wall Street, until the Associated Press signaled the all clear.
AP spokesman Paul Colford said the news cooperative was working with Twitter to investigate the issue. The AP has disabled its other Twitter accounts, Colford added.
Joe Fox, chairman and co-founder of online brokerage Ditto Trade, was at work in L.A. when he got a call from the Chicago brokerage offices telling him what had happened. Fox watched the market tanking, and its quick bounce back.
"It was a tipsy-turvy rollercoaster for a few minutes there," Fox said.
Fox said the news didn't sound right to him when he first heard it. He thinks that traders are being more cautious in the wake of the 2010 "flash crash," which sent the Dow spiraling 600 points in a matter of minutes.
After the brief sell-off investors turned their focus back to earnings.
The Dow Jones industrial average and the Standard & Poor's 500 index both rose 1 percent, and rose for a third straight day.
In Tuesday's session, companies that do well when the economy is improving led the market higher after several of them notched strong earnings.
Coach, a maker of luxury handbags, and Netflix, which streams TV shows and movies over the Internet, were big winners after reporting profits that impressed investors. Financial stocks rose after Travelers' earnings beat analysts' expectations.
That's a change from earlier this year. The stock market's surge in 2013 has been led by so-called defensive industries such as health care, consumer staples and utilities. Investors buy those stocks when they want reliable earnings and regular dividends. Until now, they have been unsure about the strength of the economic recovery and been less enthusiastic about stocks whose fortunes are more closely tied to swings in the U.S. economy.
"For a change we are actually seeing more cyclical parts of the economy lead the market," said Michael Sheldon, chief market strategist at RDM Financial Group.
White House bombing? Trading goes on
On the floor at the Chicago Mercantile Exchange, traders quickly traded on the tweet that turned out to be a fake, selling S&P futures and buying Treasury 10-year futures. For several minutes, the floor was a flurry of activity, as it was in trading rooms across Wall Street.