NEW YORK — For a few surreal minutes, a mere 12 words on Twitter caused the world's mightiest stock market to tremble.
No sooner did hackers send a false Associated Press tweet reporting explosions at the White House on Tuesday than investors started dumping stocks — eventually unloading $134 billion worth. Turns out, some investors are not only gullible, they're impossibly fast stock traders.
Except most of the investors weren't human. They were computers, selling on autopilot beyond the control of humans, like a scene from a sci-fi horror film.
"Before you could blink, it was over," said Joe Saluzzi, co-founder of Themis Trading and an outspoken critic of high-speed computerized trading. "With people, you wouldn't have this type of reaction."
For decades, computers have been sorting through data and news to help investment funds decide whether to buy or sell. But that's old school. Now "algorithmic" trading programs sift through data, news, even tweets, and execute trades by themselves in fractions of a second, without slowpoke humans getting in the way. More than half of stock trading every day is done this way.
Markets quickly recovered after Tuesday's plunge. But the incident rattled traders and highlighted the danger of handing control to the machines. It also raised questions about whether regulators should be doing more to monitor the relationship between social media and the markets.
Irene Aldridge, a consultant to hedge funds on algorithmic programs, said many of the trading systems just count the number of positive and negative words, without any filter. She wants regulators to do more but believes that glitches and plunges may be inevitable.
Just how exactly the trading unfolded Tuesday is still a bit of a mystery.
Some experts say the computers took their cue from humans, picking up on a pause in buying as traders read the phony tweet. In Wall Street's insanely fast trading world, humans holding back for even a second could have signaled to computers that buyers were drying up and that prices could fall, and so the computers should sell fast.
Experts say the fake tweet seemed designed to catch a computer's attention.
- 31 things you might not know about the Harry...
- Which U.S. cities are the best for upward...
- Alleged sexual abuser on the run for 17 years...
- The one thing you may be giving your children...
- Back to Beijing for 2nd Olympics in 14 years
- Man describes find that could solve MH370...
- LDS Church 're-evaluating' Scouting program...
- Sex and violence harm rather than help...
- LDS Church 're-evaluating' Scouting... 109
- Religious groups react to Boy... 79
- Boy Scout board approves end to blanket... 71
- Are lawsuits ahead for church-based Boy... 31
- Oklahoma Supreme Court: Ten... 27
- 2016 Republicans use Trump, TV to make... 26
- Obama: Republican criticism of Iran... 25
- Covered California: Cost of health care... 18