Two themes that we've been consistently stressing over the past several years were beautifully illustrated today, courtesy of a hacked AP Twitter feed.
They are:
- Our markets are broken (courtesy of High Frequency Trading, or HFT, computers), and
- When things finally shift, they will do so at a speed that will shock us.
But first, the hacked AP Twitter feed:
A serious report of explosions at the White House that instantly rattled the markets was quickly revealed to be a hoax. Somehow AP was hacked.
While I am sure there's quite a bit of ink that we could spill around the idea that markets now trade off Twitter feeds and whether this is a good thing or a bad thing, the fact is that we live in a world where computers now sniff the news feeds for any tradable bit of news and then react with startling speed.
At the time of the hacked AP tweet, the S&P 500 was trading up close to 15 points, or 1%, on the day. Within seconds of the tweet, all of the U.S. stock indexes were plummeting, with nearly the entire day's gains lost in a single five-minute window on exceptionally high volume.
But the hack was quickly revealed and the damage entirely undone in the next five-minute window. No harm done, unless you had stops triggered during that event (which some undoubtedly did), and we can all just laugh about it, right?
by cmartenson 
