Dollars and Sense: The power of the tweet on Wall Street

Flash crash. Last week, with the Boston bombings, the fertilizer plant explosion in Texas, the Dow having its worst week of the year so far, and gold and silver prices plummeting, this week was a bit of a relief. Though it was not without its moments of drama, too. On Tuesday we saw something you don’t get to see every day, a “flash crash.” It began when the Associated Press, or someone everyone believed was the AP, tweeting that the White House was under attack. Within a matter of two minutes, the Dow was down 150 points. But, of course, we know now that the White House was not under attack. It turns out the AP’s Twitter account was hacked. The AP quickly figured that out, corrected the problem, and sent out correcting tweets. In fact, the AP White House reporter even made an announcement in the White House press briefing room. The bottom line is that five minutes later, the markets had completely recovered—all was back to normal. But it was a great example of how news, even news that is completely unrelated to the markets, can have a dramatic impact on the markets.

Earnings season continues. That wasn’t the only thing affecting the markets this week. Earnings season continued, but we’re seeing few surprises. Procter and Gamble issued a disappointing report. But Exxon Mobil and UPS beat expectations. So there was no real trend that drove the market this week—at least when it comes to corporate earnings.

Housing matters. Investors did react, though, to a report that sales of previously owned homes fell 0.6 percent in March. That was a bit of a surprise because the housing market had been strong. But once again we’re seeing one of the perverse consequences of the Fed artificially driving down interest rates. Mortgage rates are low, which should make houses more affordable, driving up demand and housing activity generally. But because rates are so low, banks can’t make any money lending money, so they lend only to those who pose absolutely no risk. Bob Brusca of Fact and Opinion Economics is one of many analysts who thinks interest rates might actually have to rise before banks are willing to take on borrowers with anything less than sterling credit scores.

Jobs outlook improves. So housing was down, but the jobs outlook picked up a bit this week. Jobless claims declined 16,000 last week to a seasonally adjusted 339,000, according to the Labor Department. These numbers were significantly better than expectations and indicate a continued expansion of the job market. Though here, too, it’s good news only when compared to lowered expectations. We’re still millions of jobs short of where we need to be to bring unemployment down to healthy levels.

Onward, through the fog. Today, the Commerce Department said the economy grew in the first quarter, but only at a 2.5 percent annual rate. That’s barely above inflation and population growth. Still, Goldman Sachs issued one of its influential client reports that said it expects markets to move higher into summer, telling investors to ignore the usual “sell in May and go away” mentality. Goldman raised its equities forecast to “overweight” over the coming three months on expectations of an acceleration in global growth. So they must see something they like.