June 22, 2018
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Wall Street rallies after recovery from Twitter-driven drop

A trader works on the floor at the New York Stock Exchange, April 23, 2013.
By Chuck Mikolajczak, Reuters

NEW YORK — U.S. stocks climbed on Tuesday in a broad rally, recovering from sharp declines sparked by a “bogus” Associated Press tweet about explosions at the White House.

A false tweet by hackers of two explosions at the White House that injured U.S. President Barack Obama provoked a steep drop in stocks, before they quickly recovered minutes later.

Thomson Reuters data showed the benchmark S&P 500 index fell 14.6 points, or 0.93 percent, in the space of 3 minutes when the tweet hit the market. With the S&P 500 valued at about $14.6 trillion at the time of the false tweet, the plunge briefly wiped out $136.5 billion of the index’s value.

“If that was true that had happened, that’s a justified selloff, but because people suffer from information overload, people tend to overreact and don’t wait to substantiate things — that is the downside to a 24-7 news cycle,” said Jason Weisberg, managing director of Seaport Securities Corp in New York.

“You want instantaneous pricing, you want all the advantages of the technology, well then, you have to live by the negatives that the speed and expediency provide.”

The move was a reminder of the May 6, 2010, tumble in markets now known as the “flash crash,” when the Dow industrials dropped more than 600 points, eventually piling up a loss of about 1,000 points, in a few minutes before recovering.

Stocks had seen a solid advance before the tweet, lifted by a host of strong corporate earnings, including Travelers Cos. Inc., Netflix Inc. and Coach Inc.

The Dow Jones industrial average climbed 152.29 points, or 1.05 percent, to 14,719.46 at the close. The Standard & Poor’s 500 Index gained 16.28 points, or 1.04 percent, to 1,578.78. The Nasdaq Composite Index advanced 35.78 points, or 1.11 percent, to close at 3,269.33.

Netflix Inc. shares jumped 24.4 percent to $216.99 while Coach shot up 9.8 percent to $55.55. They were the S&P 500′s two biggest percentage gainers.

Netflix shares shot higher after the movie streaming service reported earnings that beat expectations and strong subscriber growth. Coach stock leaped after the upscale leather goods maker and retailer reported higher-than-expected quarterly sales.

Travelers Cos helped lift the Dow, up 2.1 percent at $86.35 after the insurer posted earnings that topped expectations and boosted its dividend.

Earnings season has been largely positive, with more than 68.9 percent of S&P 500 companies that have reported results so far beating expectations, according to Thomson Reuters data. Since 1994, 63 percent have surpassed estimates on average, while the beat rate is 67 percent for the past four quarters.

“We are encouraged to see the market focusing on fundamentals, because we had been in a period where the macro trade was pretty much driving things — whatever the global macro event was or political event was seemed to be affecting the movement of the markets for a period of time,” said Paul Mangus, head of equity research and strategy at Wells Fargo Private Bank in Charlotte, N.C.

The benchmark S&P 500 index has risen 2.4 percent over the past three sessions.

Analysts see earnings growth of 2.3 percent this quarter, up from expectations of 1.5 percent at the start of the month.

Housing stocks ranked among the best performers, after Barclays raised its rating on the homebuilding sector to “positive” from “neutral.” The sector also got a lift from encouraging housing data, with U.S. new home sales up 1.5 percent in March.

The PHLX housing sector index rose 3.8 percent, led by a 9.3 percent gain in Toll Brothers to $34.13. Barclays raised its recommendation on Toll Brothers’ stock to an “overweight” rating as part of the firm’s broader sector call.

Volume was active, with about 6.39 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the daily average of 6.38 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 4 to 1, while on the Nasdaq, more than three stocks rose for every one that fell.


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