Markets Crash Briefly Over White House Bomb Fake

Tue pic

[Chart courtesy of MarketWatch.com]

Equities logged a third straight day of gains in late trading Tuesday. Midday, the indexes took steep nosedive (see chart above) following a false AP tweet that indicated that the White House had been the victim of an explosion and that President Obama had been injured.

AP confirmed its Twitter account was hacked. Almost immediately following the tweet, the Dow Jones Industrial Average took a quick 143-point plunge. Within six minutes, the Dow recovered its losses and was trading with triple-digit gains. The three-minute plunge triggered by the tweet briefly wiped out $136.5 billion of the S&P 500 index’s value, according to Reuters data.

In the end, the Dow finished up 1.05 percent while the S&P 500 and the Nasdaq also finished near session highs. The Nasdaq rose 1.10% after having been up as much as 1.3% intraday. The S&P 500 was up 1.04%. The Dow and S&P 500 are back in positive territory for April.

Stocks were lifted higher by a flurry of earnings beats, with four advancers for each decliner. Companies that do well when the economy is improving led the way. Coach and Netflix were big winners after reporting profits that impressed investors. Financial stocks rose after Travelers’ earnings beat analysts’ expectations.

Also, report on new home sales seemed to give investors encouragement. The Commerce Department says new home sales rose 1.5% in March to an adjusted annual rate of 417,000. Despite the rise, the tally came in below analyst estimates of 420,000. Home sales volume is key data many analysts are looking for. Higher home prices along with more sales point to better economic growth. Because of the government spending cuts, 2013 growth depends heavily on housing and automobile sales.

Today’s housing figures are showing strength in the U.S. economy, which is in contrast with weakness elsewhere. Euro-area services and factory output shrank for a 15th month in April as the currency bloc struggled to emerge from a recession, adding to pressure on the European Central Bank to do more to boost growth.

China’s manufacturing is expanding at a slower pace this month on weakness in global and domestic demand, according to a Purchasing Managers’ Index released by HSBC Holdings and Markit Economics, fueling concern that the world’s second-biggest economy is faltering.

After the market closed, Apple reported better-than-expected second quarter revenue of $43.6 billion, reflecting strong sales of the iPad and iPhone. Wall Street’s average forecast for Apple’s revenue was $42.3 billion. The company also announced an expanded cash return program for shareholders. Expect heavy trading tomorrow with more earnings coming. Boeing is one to watch.

Our Trend Tracking Indexes (TTIs) followed the markets higher and therefore deeper into bullish territory with the Domestic TTI now sitting at +3.54% while the International TTI closed at +7.03%.

Today’s mini flash crash was another stark reminder that trailing sell stops should never be placed ahead of time. If you had a close stop in an equity position today, you may have been stopped out at a miserable fill only to watch the markets recoup and rally higher. For more on this topic, please see my post “Front Runners.”

The ETF Model Portfolios will be updated and posted tomorrow morning.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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