Twitter Speaks, Markets Listen, and Fears Rise

Could the global economy hinge on 140 characters? That is the question the financial industry and government regulators are trying to answer after a Twitter hoax on April 23 that claimed President Barack Obama was injured in an explosion at the White House. That report caused the Dow Jones industrial average to drop temporarily by 150 points, erasing $136 billion in market value. The markets recovered in minutes, but the episode has heightened concern among regulators about the combination of social media and high-frequency trading. The vulnerability, in part, stems from the Securities and Exchange Commission’s decision this month to let companies and executives use social media sites like Twitter and Facebook to broadcast market-moving news.