How One Tweet Can Cause the Stock Market to Crash

One false tweet from the Associated Press’s Twitter account caused the stock market to crash within minutes. The tweet reported that there had been explosions at the White House that had injured President Obama. The message read “Breaking: Two explosions in the White House and Barack Obama is injured”. Immediately, the stock market dropped, yet bounced back right after it became clear that the Associated Press’s Twitter account had been hacked.

The speed of the reaction highlights how fast and suceptible our financial markets are to technological glitches, and how significant Twitter’s impact can be. In the investing world, high-speed computer trades control the entire market, which explains why chaos ensued after the Tweet was posted. The tweet was posted at 1p.m., and between 1:08 and 1:10pm the Dow Jones Industrial average fell more than 100 points. Joseph Saluzzi of the equity-trading firm Themis Trading wrote “It wasn’t just the stock market. It was the bond market and the commodity market and everything. The event was done before humans could even process it”. He continues and says that tracking social media has “become the norm in trading”. Twitter and the Web are important for analyzing news feeds, yet this clearly backfires when a false or hacked tweet is posted.

This case isn’t the only example of a fake tweet causing a huge public reaction. In February, Burger King and Jeep’s Twitter accounts were hacked and spread rumors that said that each company had been sold to their rival. In the past year, National Public Radio, CBS 60 Minutes, and Reuters News and several other major Twitter accounts were hacked. However, the most recent AP hack had the most disastrous results: the tweet wiped out $136.5 billion of the S&P 500 index value.

This AP tweet, combined with all of the misinformation surrounding the Boston bombing shows how 140 characters can have instant and disastrous results for our public and our stock market. These hacks have been occurring all too often, and highlight that Twitter is often not a reliable or quality news source. We should all start to be more aware of the environment of social media: fake tweets happen, and we should all double check information before re-tweeting or reposting. We have to ask ourselves what’s more important: getting fast information or correct information.

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3 responses to “How One Tweet Can Cause the Stock Market to Crash

  • vcahen

    This is really interesting and scary at the same time. The fact that social media has the effect to crash such a large portion of the US economy demonstrates how dependent individuals are on Social media

  • ohaberer

    I guess I am a tad bit confused (largely due to my ignorance on the matter). Why would the president being harmed so adversely affect the stock market and commodities and bonds? Why would it trigger such financial panic? I am trying to more thoroughly understand the exact chain of events that would lead to this or the specific correlation.

  • madelinelparrish

    This is a crazy example of the scope of twitter and other social media! I’m definitely in agreement with ohaberer in that I’m not sure exactly how people would translate that into an economic effect but its still amazing to thing that all happened so quickly!

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