The swift reaction demonstrates once more how vulnerable the markets have become to technological glitches. The bombing in Boston last week and the harrowing manhunt that ensued probably hastened the response from an already jittery investing public.
The tweet popped up on traders’ screens shortly after 1 p.m. The AP used social media, its Web site and its corporate blog to announce that its Twitter account had been hacked. The company said it was investigating the matter with Twitter, and the White House weighed in to calm nerves.
“The president is fine,” White House spokesman Jay Carney said. “I was just with him.”
But in the investing world, where super-high-speed computer trades dominate the market, the reassurances did not come quickly enough to prevent momentary chaos. The Dow Jones industrial average fell more than 100 points between 1:08 p.m. and 1:10 pm.
“And it wasn’t just the stock market. It was the bond market and commodity market and everything,” said Joseph Saluzzi, co-head of the equity-trading firm Themis Trading. “The event was done before humans could even process it.”
Saluzzi said he saw the post immediately, because he keeps an eye on Twitter for the entire trading day to learn about any potentially market-moving events. Market experts say such close tracking of social media has become the norm in trading.
“Firms are looking for information wherever they can find it,” said Larry Tabb, chief executive of Tabb Group, a financial research and consulting firm. “They’re analyzing real-time news feeds, scanning the Web and mining Twitter feeds. . . . They price news.”
But increasingly, the method has backfired. During a one-week stretch in February, hackers infiltrated the Twitter accounts of Burger King and Jeep, spreading false posts that each company had been sold to a rival.
A string of such corporate Twitter hacks in recent months prompted traders at Jones Trading Institutional Services to sit tight when they spotted the AP tweet on Tuesday, said Tom Carter, a managing director in the firm’s Los Angeles office.
The traders in Carter’s office, who stay connected with the firm’s other offices via a loudspeaker they call “the hoot,” were immediately suspicious.
“Someone said over the hoot that there’s a Twitter report about explosions at the White House,” Carter said. “We had a desk analyst and he told us to just wait. We watched the stock drop, then it stopped, and then it started bouncing around and it popped straight back up again.”
The FBI is investigating the matter, said FBI spokeswoman Jenny Shearer.
The event also caught the attention of Daniel Gallagher and Luis Aguilar of the Securities and Exchange Commission. The commissioners both asked the staff to look into the matter. An agency official said the staff routinely follows up on sharp market moves.
One of the most harrowing was the “flash crash” of May 6, 2010, when the stock market plunged nearly 1,000 points in minutes, then whipped back up. For months, the SEC struggled to get a handle on what happened and piece together the day’s trades, highlighting the wide technological gulf between the regulators and the regulated.
The SEC also has had its own brush with social media.
In July, the SEC told Netflix that it may face enforcement action because its chief executive had used his personal Facebook account to boast that his Internet video-streaming service had streamed more than 1 billion hours of content in June, sharing what the SEC viewed as potentially material information with a select group of investors.
The agency ultimately decided that companies can use social media to unveil key information about their operations as long as they’ve told investors where to look for it.