Trade Resources Economy US Stocks Ended a Tumultuous Day with Strong Gains

US Stocks Ended a Tumultuous Day with Strong Gains

US stocks ended a tumultuous day with strong gains after a false tweet briefly sent financial markets veering, underscoring technology's role in tightly linking global markets.

The Dow Jones Industrial Average briefly plunged Tuesday afternoon before finishing with a gain of 152.29 points, or 1.05 per cent, to 14,719.46. Oil also briefly dipped, while US Treasury bond prices soared, after a tweet from the Associated Press's Twitter account claimed that there were two explosions in the White House and that President Barack Obama had been injured.

Markets quickly swung back after the AP said on its corporate website that its account had been hacked. The White House confirmed that there had been no incident.

At the height of the confusion, the blue-chip Dow plunged by about 145 points between 1.08pm and 1.10pm EDT, following the erroneous tweet. But stocks soon recovered.

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Observers said the episode highlighted the growing use by players in financial markets of social media such as Twitter and Facebook, and underscored the dangers of security breaches at a time when many investors are quick to trade on news.

Keith Bliss, senior vice president with New York brokerage Cuttone & Co on the trading floor of the New York Stock Exchange, said he heard a slow wave of noise across the exchange floor as traders responded to the first tweet.

"We all started looking at it to figure out what was going on, and just as quickly there was another wave of noise after the AP denied the story," Mr Bliss said. "Just goes to show, you shouldn't have a knee-jerk reaction to anything that comes across Twitter."

The Associated Press said it was working with Twitter to investigate the issue and had disabled its other Twitter accounts following the attack.

The Syrian Electronic Army claimed responsibility for the hack but this couldn't be corroborated. The group has taken credit for a string of Web attacks on media targets it sees as sympathetic to Syria's rebels. Among the targets the group claims to have hacked are Twitter feeds of Al-Jazeera English and the BBC.

The FBI has opened an investigation into the incident, spokeswoman Jenny Shearer said.

The stock move was echoed by similar gyrations in other markets, where oil momentarily lost 0.7 per cent before recovering, and the CBOE Market Volatility Index, the "fear gauge" known as the VIX, spiked 9 per cent before falling back to its level just a few minutes earlier. The VIX finished down 6.2 per cent on the day.

Trading volumes in S&P 500 e-mini contracts on the Chicago Mercantile Exchange, futures contracts tracking the S&P 500, shot up to 83,388 traded contracts at 1:09 p.m. EDT, from about 295 traded contracts just two minutes earlier. In all, some 314,000 contracts changed hands in five minutes.

The dollar fell against the Japanese yen after the AP's tweet, dropping as low as 98.58 yen from Y99.27 before the tweet. It snapped back from all losses within four minutes.

Among precious metals, gold futures saw a brief bump of more than $US5 per troy ounce but quickly fell back to its previous level, around $US1,409. Silver futures moved less than $US1 per troy ounce and also reverted to their prior level when it became clear the report was a hoax.

At about 1.10pm EDT, yields on 10-year safe-haven Treasurys fell about 0.05 percentage points, to 1.648 per cent from 1.703 per cent, according to Tradeweb. But by 1.20pm EDT, yields were back up to 1.694 per cent.

"It's a huge drop in such a short period of time, and it could only have been due to some type of huge flight to quality resulting from geopolitical concerns," said Gary Pollack, managing director at Deutsche Bank Asset & Wealth Management. "An explosion at the White House that was rumoured to have occurred would certainly be a good example of something like that."

Peter Donovan, an oil-options broker at Vantage Trading working on the floor of the New York Mercantile Exchange, said some traders quickly exited positions after the erroneous report of a terrorist attack. "That sort of stuff gets our attention, as you can imagine...but it was immediately met with scepticism," he said.

As the false Twitter report first spread, a staffer at Los Angeles-based JonesTrading Institutional Services said over a companywide loudspeaker: "Careful, those things can be hacked," said Tom Carter, a managing director at the brokerage.

"We made sure no one made a call on it, and sure enough, look what happened," Mr Carter said. "You've really got to be careful in those moments. It would be irresponsible to start calling clients about it."

The momentary scare came on a day of broad gains for the market, the third straight advance for the major US large-cap benchmarks. The blue-chip Dow finished near the day's highs, while the Standard & Poor's 500-stock index added 16.27 points, or 1.04 per cent, to 1578.78. All 10 sectors of the index finished in positive territory.

The Nasdaq Composite, meanwhile, advanced 35.78 points, or 1.11 per cent, to 3269.33, outpacing the Dow and the S&P 500 for a third straight day.

Financial stocks led the market higher following a pair of strong reports on the housing market and some dividend increases in the sector. Bank of America, which was upgraded by Morgan Stanley on Tuesday, gained 3 per cent, and Travelers rose 2.1 per cent after the insurer raised its dividend and reported quarterly earnings that topped expectations.

DuPont climbed the most among Dow components, rising 4.1 per cent after it boosted its dividend and beat analysts' earnings estimates. United Technologies fell 0.8 per cent after it missed analysts' earnings and revenue estimates.

Netflix soared 24 per cent to lead the S&P 500 components after the movie-subscription company reported better-than-expected first-quarter results, amid strong growth in new US subscribers. The stock is on pace to finish at its highest level since September 2011.

"We're not hearing the dour reports out of companies that we had expected to see," said Mark Luschini, chief investment strategist with Janney Montgomery Scott, which oversees $US2.6 billion in its asset-management arm. "It's the qualitative aspects of it, and not just the numbers themselves, that have been relatively decent."

In economic headlines, Markit Economics' composite purchasing managers index for the US showed a reading of 52 for April. Readings above 50 signal expansion.

Meanwhile, the Federal Housing Finance Agency's February home-price index showed a monthly rise of 0.7 per cent in February, while new-home sales for March rose 1.5 per cent to a seasonally adjusted annualized rate of 417,000. Both readings on the housing market were roughly in line with expectations, and bolstered shares of home builders. PulteGroup, D.R. Horton and Lennar rose 6 per cent, 5.4 per cent and 6.9 per cent respectively.

European markets rallied. The Stoxx Europe 600 index climbed 2.4 per cent, as signs of further weakening of the euro-zone economy sparked hopes of a shift away from austerity and toward policies that stimulate growth.

On Monday, European Commission President Jose Manuel Barroso said the austerity policy the European Union has been pursuing no longer has the public backing needed to work. The European Central Bank meets next week amid growing hopes for stimulative action by the central bank.

Markit's purchasing managers index for the euro zone was unchanged at 46.5 in April. In the region's largest economy, Germany, the composite PMI fell to a six-month low of 48.8 from 50.6 in March. Meantime, France's PMI rose to 44.2 in April, from a four-year low in March. Germany's DAX 30 index gained 2.4 per cent for its best day in five months, while France's CAC-40 jumped 3.6 per cent for its biggest gain since August.

"In Europe, it's all about the rate of change--we're going from horrible data to not-so-bad data, and the market will rally off that," said Andres Garcia-Amaya, global market strategist at the mutual-fund arm of J.P. Morgan Asset Management, which oversees $US400 billion. More generally in Europe, Mr Garcia-Amaya argued, "they can't just use austerity without a plan to help these countries grow. If we see a change from leaders on that perspective, that'll be very positive for Europe."

In Asia, China's Shanghai Composite tumbled 2.6 per cent after HSBC's preliminary purchasing manager's index for April declined more than expected, slipping to 50.5 from 51.6 in March. Japan's Nikkei Stock Average declined 0.3 per cent.

Gold futures finished the day down 0.9 per cent to $US1,408.60 an ounce, while silver fell 2.2 per cent to an October 2010 low. Crude-oil futures ended flat at $US89.18 a barrel. The dollar rose against the euro and the yen. Demand for Treasurys slipped, nudging the yield on the benchmark 10-year note up to 1.700 per cent.

In other stock movers, MetLife rose 5.5 per cent after the insurer raised its dividend for the first time since 2007, coming after clashes with federal regulators on its capital requirements. The stock had given up 11 per cent since mid-March.

Apple climbed 1.9 per cent as investors prepared for the technology giant to report fiscal second-quarter results after the closing bell. The stock has lost 25 per cent so far this year, as earnings estimates for the March quarter have fallen from $US12.24 a share on Dec. 31 to $US9.98 a share through Monday, according to FactSet.

Coach surged 9.8 per cent after the luxury-goods company beat earnings and revenue expectations, raised its dividends and unveiled a succession plan.

Additional reporting: Mike Cherney, Jerry DiColo, Kaitlyn Kiernan, Matt Jarzemsky, Alexandra Scaggs, Chris Dieterich, Nicole Hong and Christian Berthelsen, AP

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US Markets Reel on False Ap Tweet of Explosions at White House
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