Twitter has a direct impact on the markets. Here is how I know: There are news services that are dedicated to delivering important information that could affec

Twitter has a direct impact on the markets. Here is how I know: There are news services that are dedicated to delivering important information that could affect markets as quickly as possible. I heard the news from one of these services directly before the market seriously dropped. The important question is why the markets reacted the way they did. There seems to be a sentiment that these sorts of moves are catastrophic and avoidable, but the reality is that these are movements reacting to real information from the environment that will affect the future state of economics. When bad news develops, more efficient markets drop faster in anticipation for this current or future event. This means that the information, or the bad event, has been diffused among the population. With the AP situation, the news of such an extreme terrorist act would surely cause unbalance throughout Western economies; disrupting peace, supply chains, and many companies. This would have a direct impact on equities like the DOW. Within two minutes of the fake tweet, it was reported as being fake and the markets rebounded. In fact, I would guess that the majority of people hurt by this volatility spike were market making or algorithmic traders. They either were directly linked to twitter text feeds, selling on the way down and buying at the top of the retracement; or dump positions put on earlier in the morning. Of course, if the event happened, these traders would have been the winners. The problem with this current situation is that the high-speed news delivery services spread this fake tweet without any verification (except trust that the AP feed is trust-worthy), and people with direct access to these services were most likely individuals with access to trading accounts, allowing them to drop a variety of assets, most notable the DOW or S&P.