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Social Media’s Effects On Markets Concern Regulators

That is the question the financial industry and government regulators are trying to answer after a Twitter hoax on Tuesday that claimed President Obama was injured in an explosion at the White House. That report caused the Dow Jones industrial average to drop temporarily by 150 points, erasing $136 billion in market value.

The markets recovered in minutes, but the episode has heightened concern among regulators about the combination of social media and high-frequency trading.

The vulnerability, in part, stems from the Securities and Exchange Commission’s decision this month to let companies and executives use social media sites like Twitter and Facebook to broadcast market-moving news.

High-frequency trading systems are designed to make trades based on keywords within milliseconds. The hoax message also went out on a new feature on Bloomberg’s financial data terminals that delivers select Twitter posts to hedge funds, investment banks and other users.

On Tuesday, the Commodity Futures Trading Commission plans to hold a public meeting in Washington with a couple of dozen high-frequency traders to discuss whether there should be additional safeguards to protect against the effects of social media on markets.

Even as markets rebounded on Tuesday, some investors lost money on the quick decline while others made money if they bet on a sharp drop.

“In 2010, we passed Dodd-Frank, the big financial reform bill, but nowhere in there do they mention high-speed trading or technology,” said Bart Chilton, a member of the trading commission. “That’s how quickly markets are morphing. Now, here we are three years later, woefully unprepared.”

The false report (“Breaking: Two Explosions in the White House and Barack Obama is injured”) was posted on Tuesday after Syrian hackers broke into The Associated Press’s Twitter feed.

Immediately, the mood shifted on the floor of the New York Stock Exchange.

“It was nine, 10, 11 seconds and it was fast and then the question was ‘Why’?” said Andrew Frankel, co-president of the brokerage firm Stuart Frankel & Company.

He said traders realized shortly after that the post was a hoax since the television screens showing Bloomberg and CNBC had nothing about an explosion at the White House. Still, the episode recalled the 2010 “flash crash,” when an automated trading program caused the Dow to sink more than 600 points, and it left a deep skepticism of social media on the trading floor.

“You look at how quickly that happened and now everyone wants to release corporate earnings on Twitter,” Mr. Frankel said, in between calling out, “Sell!” to his team. He added: “The concern is ‘How do you know what’s right and what’s not? How do you know what’s hacked and what isn’t?’ ”

Spokesmen for Twitter and The A.P. declined to comment.

Even though Syrian hackers remain the prime suspects, the trading commission is now investigating 28 different futures contracts and specifically examining the five-minute period before and after The A.P.’s Twitter account was hacked. It is looking to see if there were anomalous trades, and investors who benefited from them.

“To think it was all lost because of this hack attack is very disconcerting,” Mr. Chilton of the commission said. “We would be irresponsible if we turned a blind eye to these debacles.”

The decision to allow market information on social media came after Reed Hastings, chief executive of Netflix, had posted on Facebook that the service had exceeded one billion hours of streamed video a month, sending its stock price up.

“We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate,” the S.E.C. said on April 2.

Two days later, Bloomberg introduced a feature on its financial data terminals that incorporates a stream of relevant Twitter posts delivered to investors. All of Bloomberg’s more than 310,000 subscribers, who pay at least $20,000 a year for access to the terminals, now have access to those posts, which the company says are clearly identified as Twitter messages.

“The S.E.C.’s decision reflects the reality that we were dealing with in that this information is being distributed by companies and investors are consuming it and we needed to get it on the terminal,” said Brian Rooney, the company’s core product manager for news, adding, “We’re not in a world where people live in a vacuum.”

At the same time, the use of algorithms designed to peruse millions of sources of information like blogs and social media to analyze and execute trades is only becoming more widespread.

The Caucus: Hacked A.P. Twitter Feed Jars Markets

Hackers hijacked the Twitter account for The Associated Press on Tuesday and sent out an erroneous message reporting explosions at the White House that injured President Obama.

Within minutes, Jay Carney, Mr. Obama’s press secretary, confirmed that the president was unharmed, and Julie Pace, the chief White House correspondent for The A.P., announced at a White House briefing that the account had been hacked.

Twitter suspended the account but by then the post had already moved markets. The Dow Jones industrial average abruptly plummeted more than 150 points, then surged back after it became clear there had been no incident.

A group calling itself the Syrian Electronic Army claimed responsibility for the attack. The group’s Twitter account is linked to the Web site Syrianelectronicarmy.com, an Arabic language Web site that broadcasts what the group says are its latest computer attacks. Even as the Twitter accounts for @AP and @AP_Mobile were suspended Tuesday afternoon, the Syrian Electronic Army was posting.

Ops! @AP get owned by Syrian Electronic Army! #SEA #Syria #ByeByeObama http://t.co/HTKoO6gIL6

— SyrianElectronicArmy (@Official_SEA6) 23 Apr 13

The A.P.’s account was the sixth prominent Twitter account to be hacked in recent months. On Saturday, three CBS-affiliated Twitter accounts were hacked and used to post suspicious links.

Hackers, saying they were part of the Syrian Electronic Army, claimed responsibility for hacking several NPR Twitter accounts last week as well as BBC Twitter accounts last month.

The episodes raise questions about the security of social media passwords and the ease of access to brand-name accounts. Logging on to Twitter requires the same process for a company as for a consumer — just a user name and one password.

Security experts say Twitter could do more. The company has yet to offer its users two-factor authentication, a service that texts a second login PIN to users’ mobile phones, to keep attackers from hijacking their accounts with a single, stolen password.

Microsoft rolled out two-factor authentication last week. Apple added it in March. Both Google and Facebook have offered the service for years.

“It’s a very established baseline,” said Mark Risher, co-founder of Imperium, a Silicon Valley start-up that aims to help social networks. “But there are costs, and user friction is introduced. You could put four deadbolts on your front door, but it’s going to be a pain every time you go to the drugstore. That said, why not offer it? I don’t have a good answer for that.”

Officials at Twitter did not return requests for comment. In the past, the company has said that security is something it does not take lightly. Twitter has automatic and manual controls to help identify malicious content on the site, and last year Twitter sued those responsible for five of the most-used spamming tools on the site.

But preventing hacking and identifying fake accounts continues to be more art than science. Security researchers estimate that as many as 20 million Twitter accounts on the platform are fakes, and real accounts continue to be catnip for hackers.

Security experts also say it is not clear whether two-factor authentication would have prevented the attack on The A.P.’s account. Paul Colford, a spokesman for The A.P., said the hacking incident was preceded by a “phishing” attempt on The A.P.’s corporate e-mail network. Employees had been sent e-mails with malicious links or attachments that, once clicked, would give an attacker a foothold.

“In the case of a phishing message, two-factor authentication would not eliminate the problem,” Mr. Risher said. “There are ways to circumvent this. I could create a fake Web page for Twitter and ask you to enter your user credentials.”

Mr. Colford said the phishing attempt had been blocked, raising the question of how hackers had grabbed credentials for the account.

This post has been revised to reflect the following correction:

Correction: April 23, 2013

An earlier version of this story incorrectly attributed a statement about a phishing attempt on The A.P.'s corporate e-mail system to a spokeswoman for the news organization. That person, an employee of The A.P., was not authorized to speak for the organization.

In a Changing China, New Matchmaking Markets

“This is a good place to hunt,” she told me. “I always have good luck here.”

For Ms. Yang, Joy City is not so much a consumer mecca as an urban Serengeti that she prowls for potential wives for some of China’s richest bachelors. Ms. Yang, 28, is one of China’s premier love hunters, a new breed of matchmaker that has proliferated in the country’s economic boom. The company she works for, Diamond Love and Marriage, caters to China’s nouveaux riches: men, and occasionally women, willing to pay tens and even hundreds of thousands of dollars to outsource the search for their ideal spouse.

In Joy City, Ms. Yang gave instructions to her eight-scout team, one of six squads the company was deploying in three cities for one Shanghai millionaire. This client had provided a list of requirements for his future wife, including her age (22 to 26), skin color (“white as porcelain”) and sexual history (yes, a virgin).

“These millionaires are very picky, you know?” Ms. Yang said. “Nobody can ever be perfect enough.” Still, the potential reward for Ms. Yang is huge: The love hunter who finds the client’s eventual choice will receive a bonus of more than $30,000, around five times the average annual salary in this line of work.

Suddenly, a signal came.

From across the atrium, a co-worker of Ms. Yang caught her eye and nodded at a woman in a blue dress, walking alone. Ms. Yang had shaken off her colleague’s suggestions several times that day, but this time she circled behind the woman in question.

“Perfect skin,” she whispered. “Elegant face.” When the woman walked into H & M, Ms. Yang intercepted her in the sweater aisle. “I’m so sorry to bother you,” she said with a honeyed smile. “I’m a love hunter. Are you looking for love?”

Three miles away, in a Beijing park near the Temple of Heaven, a woman named Yu Jia jostled for space under a grove of elms. A widowed 67-year-old pensioner, she was clearing a spot on the ground for a sign she had scrawled for her son. “Seeking Marriage,” read the wrinkled sheet of paper, which Ms. Yu held in place with a few fragments of brick and stone. “Male. Single. Born 1972. Height 172 cm. High school education. Job in Beijing.”

Ms. Yu is another kind of love hunter: a parent seeking a spouse for an adult child in the so-called marriage markets that have popped up in parks across the city. Long rows of graying men and women sat in front of signs listing their children’s qualifications. Hundreds of others trudged by, stopping occasionally to make an inquiry.

Ms. Yu’s crude sign had no flourishes: no photograph, no blood type, no zodiac sign, no line about income or assets. Unlike the millionaire’s wish list, the sign didn’t even specify what sort of wife her son wanted. “We don’t have much choice,” she explained. “At this point, we can’t rule anybody out.”

In the four years she has been seeking a wife for her son, Zhao Yong, there have been only a handful of prospects. Even so, when a woman in a green plastic visor paused to scan her sign that day, Ms. Yu put on a bright smile and told of her son’s fine character and good looks. The woman asked: “Does he own an apartment in Beijing?” Ms. Yu’s smile wilted, and the woman moved on.

The New Matchmaking

Three decades of combustive economic growth have reshaped the landscape of marriage in China. A generation ago, China was one of the world’s most equal nations, in both gender and wealth. Most people were poor, and tight controls over housing, employment, travel and family life simplified the search for a suitable match — what the Chinese call mendang hudui, meaning roughly “family doors of equal size.”

Nokia's Low-Priced Phone Targets Emerging Markets

BERLIN — Nokia, struggling to regain traction with its make-or-break line of Windows smartphones, introduced a moderately priced, Internet-ready model on Tuesday targeted at emerging markets around the world.

Nokia said the new smartphone, the Lumia 510, would cost about $199 and be sold initially in India, China, Latin America and some other emerging markets where the penetration of smartphones, unlike those in more mature Western markets, is still very low.

The new smartphone is the eighth in the Lumia line running the Windows operating system. Nokia is hoping the line will reinvigorate sales and is resting much of its future on its success, according to analysts.

Last week, Nokia reported a loss of €969 million, or $1.26 billion, for the third quarter, as sales of Lumia smartphones fell to 2.9 million units from 4 million in the previous quarter.

Nokia, the global smartphone market leader until the arrival of the iPhone from Apple in 2007, is fighting to reassert its relevance in an industry that has become increasingly dominated by models running Apple’s iOS and Google’s Android mobile operating systems.

The newest smartphone is the first step in a major expansion of the Lumia line announced last week to create a full range of alternatives to iOS and Android phones.

“With the Nokia Lumia 510, we continue to meet our commitment to bring Windows Phone to new, lower price points,” said Jo Harlow, executive vice president of Nokia’s smart devices business.

While the company, based in Espoo, Finland, has slipped in the global rankings during its two-year transition to Windows phones, it remains the No.2 maker of cellphones after Samsung. In the second quarter, Nokia sold 84 million cellphones worldwide while Samsung sold 93 million, according to Strategy Analytics, a research firm in Boston.

The Lumia 510 will be sold starting in November in five different colors, red, yellow, cyan, white and black, and will run on version 7.5 of the Microsoft Windows Phone operating system. The touch-screen phone comes with a five-megapixel camera and Microsoft’s scrolling tiles interface.

Nokia is seeking to exploit its sizable presence in emerging markets, where consumers are just beginning to buy Internet-ready smartphones.

Sixteen years after Nokia introduced the world’s first smartphone, the Nokia Communicator, the number of smartphone users worldwide finally topped one billion at the end of September, according to Strategy Analytics. But it will take less than three years, by the end of 2015, to add the second billion, according to the research firm.

Neil Mawston, a Strategy Analytics analyst in Milton Keynes, England, said most of those new buyers were expected to come from markets that Nokia was targeting with the Lumia 510: China, India and other emerging markets in Asia and Latin America.

Nokia’s long history in emerging markets will benefit the Finnish company, Mr. Mawston said, but it must still overcome the reputational damage suffered among consumers over the past two years as it phased out phones based on Nokia’s in-house operating system, Symbian.

He compared Nokia’s challenge to that faced by Samsung, which was struggling before it released the Galaxy S smartphone in March 2010. Sales of the Galaxy smartphone line helped Samsung overtake Nokia this year as the top cellphone maker.

“It will be a double-edged sword for Nokia,” Mr. Mawston said. “But there is definitely potential for Nokia to turn things around. They only need one killer device.”

Convertible bonds planned

Nokia plans to raise €750 million by issuing bonds that can be converted into shares, seeking an inexpensive way to bolster its fragile finances as it battles to win back market share, Reuters reported from Helsinki.

With its cash reserves falling and its credit ratings cut to junk over the past year, analysts have said Nokia needs to show a turnaround in the next several months if it is to survive.

But analysts said Nokia was smart to choose convertible bonds, which normally pay lower interest rates than conventional bonds because they offer investors the chance of making money when they are converted into shares.

“It is a rather cheap way to get extra financing,” said Mikko Ervasti, an analyst with Evli.

Facebook’s Slide Continues Despite the Market’s Hopes

It has been a tough week for Facebook. Last Thursday, the company’s shares declined 8.5 percent in regular trading, as investors reacted to the weak earnings report the day before of Zynga, the social gaming site that is a major Facebook partner. Then last Friday, the stock was down again, to slightly under $23 a share in after-hours trading, after Facebook’s own earnings report.

This week the stock declined steadily each day.

“In this market environment, investors have little appetite for speculative opportunities, and unfortunately for Facebook, the stock will remain in the penalty box until they can demonstrate improving growth trends,” said Colin Sebastian, an analyst with Robert W. Baird & Company.

“That said,” he added, “Facebook is a powerful platform with enormous potential to change display advertising.”

Facebook made its Wall Street debut in May at a spectacular $104 billion, or $38 a share. Its assets seemed obvious: nearly a billion users, rich data about their tastes and friends, and potentially a variety of ways to make money from them, principally through advertising.

But the stock fell from its offering price almost immediately and except for part of June, never gained much ground. At $20.88, it has nearly lost half its value.

Another reason for the stock slide could be that Facebook employees will be allowed to start selling shares this month, although the bulk of the shares will be unlocked in November, raising fear on Wall Street of a glut of shares on the market.

Facebook declined to comment.

Still, the company is making money, acquiring other companies and expanding its work force. Its second-quarter revenue was $1.18 billion, which exceeded the expectations of analysts. And Facebook gained users, reporting 955 million, up from 901 million in the previous quarter.

But advertising revenues have not grown as fast as Wall Street would have liked. In the second quarter, these revenues grew 32 percent. That was a slowdown from the previous quarter, when advertising grew by about 45 percent, and far slower than in 2011.

Part of the problem, analysts say, is that users are migrating to the mobile platform faster than anyone anticipated — more than half are using Facebook on their smartphones and tablets — and the company has only recently started offering advertisements on the mobile platform.

The market research firm eMarketer said Wednesday that companies were expected to spend $6 billion on mobile advertising this year, with the United States and China making up the two largest markets.

Mobile advertising poses a fundamental challenge for Facebook, because it must be careful not to crowd the small screen with too many endorsements that could alienate users. On the other hand, the mobile platform offers Facebook a new way to collect rich data, from the location of the users to the applications downloaded.

Facebook has been experimenting with all sorts of ways to increase its advertising.

Morningstar, in a report issued last Friday after the company reported its second-quarter results, commended Facebook for its potential to refine its ad targeting but flagged several risks, including stepped-up regulation on whether the company would be allowed to track its users across the Web in a bid to serve up relevant advertising.

Morningstar warned investors that shares would continue to slide for the “next several quarters.” It said, “We would expect further near-term disappointment and would encourage investors to consider an even wider margin of safety before making an investment.”

Facebook’s Slide Continues Despite the Market’s Hopes

It has been a tough week for Facebook. Last Thursday, the company’s shares declined 8.5 percent in regular trading, as investors reacted to the weak earnings report the day before of Zynga, the social gaming site that is a major Facebook partner. Then last Friday, the stock was down again, to slightly under $23 a share in after-hours trading, after Facebook’s own earnings report.

This week the stock declined steadily each day.

“In this market environment, investors have little appetite for speculative opportunities, and unfortunately for Facebook, the stock will remain in the penalty box until they can demonstrate improving growth trends,” said Colin Sebastian, an analyst with Robert W. Baird & Company.

“That said,” he added, “Facebook is a powerful platform with enormous potential to change display advertising.”

Facebook made its Wall Street debut in May at a spectacular $104 billion, or $38 a share. Its assets seemed obvious: nearly a billion users, rich data about their tastes and friends, and potentially a variety of ways to make money from them, principally through advertising.

But the stock fell from its offering price almost immediately and except for part of June, never gained much ground. At $20.88, it has nearly lost half its value.

Another reason for the stock slide could be that Facebook employees will be allowed to start selling shares this month, although the bulk of the shares will be unlocked in November, raising fear on Wall Street of a glut of shares on the market.

Facebook declined to comment.

Still, the company is making money, acquiring other companies and expanding its work force. Its second-quarter revenue was $1.18 billion, which exceeded the expectations of analysts. And Facebook gained users, reporting 955 million, up from 901 million in the previous quarter.

But advertising revenues have not grown as fast as Wall Street would have liked. In the second quarter, these revenues grew 32 percent. That was a slowdown from the previous quarter, when advertising grew by about 45 percent, and far slower than in 2011.

Part of the problem, analysts say, is that users are migrating to the mobile platform faster than anyone anticipated — more than half are using Facebook on their smartphones and tablets — and the company has only recently started offering advertisements on the mobile platform.

The market research firm eMarketer said Wednesday that companies were expected to spend $6 billion on mobile advertising this year, with the United States and China making up the two largest markets.

Mobile advertising poses a fundamental challenge for Facebook, because it must be careful not to crowd the small screen with too many endorsements that could alienate users. On the other hand, the mobile platform offers Facebook a new way to collect rich data, from the location of the users to the applications downloaded.

Facebook has been experimenting with all sorts of ways to increase its advertising.

Morningstar, in a report issued last Friday after the company reported its second-quarter results, commended Facebook for its potential to refine its ad targeting but flagged several risks, including stepped-up regulation on whether the company would be allowed to track its users across the Web in a bid to serve up relevant advertising.

Morningstar warned investors that shares would continue to slide for the “next several quarters.” It said, “We would expect further near-term disappointment and would encourage investors to consider an even wider margin of safety before making an investment.”