Stocks gain on earnings; fake tweet shakes stocks
By From Wire Reports
Published: Wednesday, April 24, 2013, 12:01 a.m.
Hackers took control of The Associated Press Twitter account on Tuesday and sent a false tweet about explosions in the White House that briefly sent U.S. financial markets reeling. But the market recovered to end up on the plus side for the day.
In the latest high-profile hacking incident involving social media service Twitter, an official @AP account reported that two explosions at the White House injured President Barack Obama.
AP spokesman Paul Colford quickly confirmed the tweet was “bogus,” and White House spokesman Jay Carney told reporters that Obama was fine, just minutes after the tweet hit a little after 1 p.m..
But within 3 minutes of the tweet's release, virtually all U.S. markets took a plunge on the false news in what one trader described as “pure chaos.”
The Securities and Exchange Commission is looking into the bogus tweet and its impact on the markets, Commissioner Daniel Gallagher told Reuters.
“I can't tell you exactly what the facts are at this point or what we are looking for, but for sure we want to understand major swings like that, however short it was,” Gallagher said.
Reuters data showed the tweet briefly wiped out $136.5 billion of the S&P 500 index's value before markets recovered. Some traders attributed the sharp fall and bounce-back to automatic electronic trading.
“It was a tipsy-turvy rollercoaster for a few minutes there,” said Joe Fox, chairman and co-founder of online brokerage Ditto Trade.
Fox said the news didn't sound right to him when he first heard it. He thinks that traders are being more cautious since the 2010 “flash crash,” which sent the Dow spiraling 600 points in a matter of minutes.
At a time when cybersecurity and hacking have become top national security concerns, Twitter and its reach to hundreds of millions of users is coming under growing scrutiny for the risk of privacy breaches on the site.
A group calling itself the Syrian Electronic Army, which is supportive of that country's leader, President Bashar al-Assad, claimed responsibility on Tuesday on its own Twitter feed for the AP hack.
The group has in the past taken credit for similar invasions into Twitter accounts of National Public Radio, BBC, CBS' “60 Minutes” program and Reuters News.
A Twitter spokesman declined to comment on the Tuesday breach.
“There's plenty of blame to go around,” said Stewart Baker, a cybersecurity lawyer at Steptoe & Johnson in Washington. “AP should have had better passwords, Twitter should have gone to at least optional two-factor authentication months ago, and guys on the Street really should be thinking twice before they trade on Twitter reports. That's risky.”
The AP has said hackers made repeated attacks before Tuesday's incident to steal the passwords of AP journalists. AP's Twitter accounts are suspended.
After the false tweet, the benchmark S&P 500 dropped 14 points to as low as 1,563.03 before recovering, all in about five seconds. The Dow Jones Industrial Average temporarily dropped 143.5 points, or 0.98 percent.
“You have to wonder (about) this system we've built based on technology and speed,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, N.J.
“The (SEC's) mission is to protect the individual investor. And they don't feel protected today,” he said.
The Dow closed up 152.29 points at 14,719.46. The S&P 500 ended 16.28 points higher at 1,578.78. Both indexes are about 1 percent below their record high closes from nearly two weeks ago.
The Nasdaq composite rose 35.78 points, or 1 percent, to 3,269.33.
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