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The seven-minute drop in the Dow Jones Industrial Average touched off by a single tweet falsely claiming the White House had been bombed. It temporarily wiped out about 1 percent of the average, which can translate into millions or billions of dollars in market capitalization.
Stock prices plunged and then quickly recovered after a Twitter account belonging to the Associated Press was hacked and used to send a bogus report falsely claiming that the White House had been bombed and President Obama was injured.
"The @AP Twitter account has been suspended after it was hacked," an unaffected Twitter account belonging to the news organization confirmed. "The tweet about an attack on the White House was false."
In a testament to the power that social media has on real-world finances, the Dow Jones Industrial Average fell 150 points, or about 1 percent, immediately following the tweet, with other indexes reacting similarly. The Dow quickly regained the lost ground about seven minutes after the sell-off began, when the AP confirmed that the report was false.
The bogus tweet was sent from one of at least of two compromised Twitter accounts belonging to the Associated Press. Mike Baker, a reporter with the 167-year-old news organization, said the AP's mobile Twitter account was compromised as well.
"The @AP hack came less than an hour after some of us received an impressively disguised phishing email," he wrote in a separate Twitter dispatch. In recent days security personnel with the news cooperative discovered malware had infected some of its computers, officials told the New York Times.
An AP spokesman said officials are working with Twitter to investigate how the accounts were hacked. Both accounts were suspended at the time of this writing.
People claiming ties with a group known as the Syrian Electronic Army took credit for the compromise and provided this screenshot, purporting to show user control over the @AP account, as proof. The same group has taken credit for compromises of Twitter accounts belonging to National Public Radio, and the CBS network.
Enter trading bots
It's not yet possible to confirm those claims. Either way, whoever initiated the sell-offand potentially well-positioned traders who immediately recognized the report was falsehad the ability to make huge profits by (manipulating the market) capitalizing on the false news, according to this analysis from Quartz. The business news service explains:
Mom-and-pop traders could hardly move in time to profit off the dip, but seven minutes is an eternity in the world of high-frequency trading, where equities are exchanged in fractions of a second. Trading bots could certainly have bought index funds at the bottom of the plunge, quickly profiting as the rest of the market realized that the AP tweet was wrong.
And imagine if whoever hacked the APs Twitter account intended to profit from it. He, sheor, as it currently appears, the Syrian Electronic Armycould have shorted an index fund, or bet that it would fall, then quickly purchased stocks before the rest of the world realized what happened.
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