Shortly after 1 p.m. (12:30 a.m. IST), U.S. government debt prices surged briefly and stocks fell sharply after a false tweet from the Associated Press said there had been two explosions at the White House and that President Barack Obama had been injured.
An Associated Press spokesman told Reuters that an AP Twitter message reporting two explosions in the White House was "bogus." The White House said Obama was fine.
U.S. stocks sharply cut gains briefly and then bounced back. The dollar pared gains against the yen, and the euro extended declines against the dollar.
"High-frequency traders cancel their orders on even one little tweet. They provide so much liquidity and don't have obligations like market makers did in the past. We need other participants to make sure this kind of volatility doesn't happen and we don't (have them) any more," said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas. (Read: What experts say)
In the energy market, crude oil prices fell as much as 70 cents a barrel in a three-minute period following the Tweet, but just as quickly reversed those losses as it became clear the AP message was bogus.
Global equity markets resumed their upward trend, with Wall Street higher on strong corporate earnings.
The Dow Jones industrial average was up 128.86 points, or 0.88 per cent, at 14,696.03. The Standard & Poor's 500 Index was up 14.62 points, or 0.94 per cent, at 1,577.12. The Nasdaq Composite Index was up 34.82 points, or 1.08 per cent, at 3,268.37.
European shares posted their biggest one-day gain in seven months, while the euro hit a two-week low against the dollar after weak German data sparked speculation the European Central Bank could cut interest rates.
The euro was last down 0.5 per cent at $1.2999 while the dollar was up 0.1 per cent against the yen at 99.23 yen.
MSCI's world equity index, which is heavily weighted toward U.S. shares, was up 1 per cent.
The benchmark 10-year U.S. Treasury note was unchanged with the yield at 1.6945 per cent.
Copyright @ Thomson Reuters 2013