Market Whiplash: How Fake News Sent Stocks on a Wild Ride

In the fast-paced world of financial markets, information is king. But what happens when that information is fake? On April 7, 2025, the stock market experienced a dramatic rollercoaster ride, all thanks to a single false post on X (formerly Twitter). The S&P 500 surged 8.5% in just 34 minutes, only to plummet back down as the truth emerged. This wasn't just a blip on the radar; it was a stark reminder of how fake news can wreak havoc on financial markets.

The incident began with a post from an account called "Hammer Capital," which claimed that National Economic Council Director Kevin Hassett had hinted at a 90-day pause in tariffs. The post, which had barely 1,000 followers, was quickly amplified by another account, "Walter Bloomberg," with over 800,000 followers. The account, which mimicked the name of the reputable financial news service Bloomberg, added a siren emoji to the post, further fueling the frenzy.



The impact was immediate. Stock indices, which were already recovering from early-morning lows, suddenly surged. CNBC anchors were baffled, searching their screens for any indication of what was causing the turnaround. By 10:15 a.m., CNBC was reading the news on air, citing the false headline as if it were confirmed. Reuters quickly followed suit, amplifying the misinformation.

But the White House swiftly denied the rumor, and the market quickly corrected itself. The S&P 500, which had briefly added $3.6 trillion in market value, gave up its sharp gains as the truth emerged. The "Walter Bloomberg" account deleted the post, claiming they first saw it on Reuters, and market participants were left wondering what just happened.

This incident is not an isolated one. A study published in December 2024 in the Journal of Accounting and Economics found that fake financial news has been on the rise, especially in the years following the 2016 election. The study, co-authored by Austin Moss and Betty Liu, highlights how deceptive information is being used to manipulate stock prices, causing real financial damage to investors.

One of the most striking examples is the case of Farmland Partners. In 2018, a single false report claiming 310% of the company’s previous-year earnings were fabricated caused the stock price to drop by over 40% in just one day, wiping out tens of millions in market value. Such deceptive stories have real-world impacts, Moss said. Fake news can manipulate stock prices, leading to short-term volatility while also eroding long-term investor confidence.

So, why do investors fall for fake news? Moss suggests that in the fast-paced world of financial markets, speed is key. "Investors are often so eager to react to information before anyone else that they don’t verify it," he said. "That rush to act leads to false claims having a real, immediate impact on stock prices."

The study found that companies with less transparent financial reporting are more vulnerable to manipulation. "Fake news authors choose firms that are hard to understand," Moss said. "Companies that provide less forward guidance and have more complex financial statements are easier targets."

The researchers also examined the timing of fake articles relative to earnings announcements. They found that fake news authors tend to publish more articles in the days leading up to quarterly earnings releases, capitalizing on the heightened attention surrounding these announcements. "Leading up to these big events, there’s a lot of attention on the company’s results. This is when uncertainty about the company is highest, and that’s when fake news can reach a wider audience," Moss says.

But once the actual earnings report is released, fake news loses its power, as fresh, reliable data takes over. By analyzing the content of 125,475 crowdsourced financial articles from platforms like Seeking Alpha, the researchers found that 57% of fake articles discussed accounting-related topics. Compare that to genuine articles, where 88% of the articles focused on accounting. This suggests that while fake news often seeks to exploit accounting details, it is less likely to be as information-heavy or grounded in verifiable data.

The incentives to spread misinformation are varied. Some want to manipulate stock prices to profit from short-term positions, much like classic pump-and-dump schemes. For example, in the case of Farmland Partners, individuals behind the fake report had taken short positions before the article’s release, betting that the stock price would fall. Others create content for online platforms that reward clicks and views, capitalizing on sensational headlines, and still others do it for ideological reasons—even just for the enjoyment of “trolling” investors, Moss said.

The authors often hide behind anonymous profiles, he added, "so there's really no or very little reputational cost to producing this fake news since no one can easily find out who this person is."

To mitigate this growing problem, the researchers suggest companies focus on increasing transparency, offering clearer guidance and ensuring their financial statements are easily accessible and understandable. "If firms provide more transparent information, it makes it harder for fake news to convince the market," Moss said.

For individual investors, Moss advises caution and verification. "If you see a claim that seems too outrageous to be true—like an unrealistic jump in earnings or a wild accusation about a company—check the company’s financial statements," he said. By comparing these reports to the claims being made, investors can identify discrepancies and avoid falling for fake news.

He also warned that the period before earnings announcements is particularly risky. "In the three to four days before earnings announcements, that’s when fake news is most likely to spread," Moss cautions.

Finally, be wary of publications or websites that crowdsource their articles, he added. Skepticism is one of the best defenses investors have against the manipulation of stock prices by misinformation.

In conclusion, the April 7, 2025 incident on X serves as a stark reminder of the power of fake news in financial markets. As investors, it's crucial to stay vigilant, verify information, and be wary of sensational headlines. The market may be volatile, but with the right tools and mindset, investors can navigate these challenges and make informed decisions.