Fake News Triggers 8% S&P 500 Spike, 9.5% Nasdaq Surge, 7% Dow Jones Jump

On April 7, a fake news post on X from a verified account impersonating a prominent figure claimed that the White House was considering a 90-day pause on tariffs. The post, which was not affiliated with any legitimate news outlet, gained significant attention after it was mistakenly aired as a banner on a major financial news network and subsequently amplified by other sources. The market reacted swiftly to the rumor, with the S&P 500 spiking more than 8% from its low on the day, the Nasdaq adding 9.5% in less than an hour, and the Dow Jones pumping 7%. Bitcoin prices also saw a similar spike, briefly topping $80,000 before falling back again.

The official White House account quickly debunked the rumor as fake news, leading to a subsequent market correction. Despite the debunking, the episode revealed important insights about the market's sentiment. Crypto YouTuber Lark Davis noted that the market is ready to accept prolonged negotiations as long as most deals can be resolved. He also suggested that the market is primed to react positively to any developments, even minor ones like a 90-day delay. This sentiment was echoed by other market participants who commented that the fake headline might give policymakers more confidence to push for further trade negotiations, knowing that any positive announcement could lead to a significant market rally.

The fake news story originated from a misinterpretation of an interview with Kevin Hassett, one of Donald Trump’s economic advisers. When asked about the possibility of a 90-day tariff pause, Hassett gave a non-committal response, stating that the president would decide what the president would decide. He also downplayed the potential negative effects of tariffs on the economy, suggesting that any impact would be a small share of GDP. Shortly after the fake news post was deleted, Trump took to his own social media platform to threaten China with additional tariffs if they did not withdraw their recent trade abuses.

The episode highlights the market's sensitivity to trade-related news and its readiness to respond positively to any developments, even if they are later debunked as fake. This sensitivity underscores the importance of accurate and timely information in shaping market sentiment and the potential for significant market movements in response to trade-related developments. The market's reaction to the fake news story suggests that investors are eager for any signs of progress in trade negotiations, and that even minor developments can have a substantial impact on market sentiment. The episode also raises questions about the role of social media in shaping market sentiment and the potential for fake news to influence market movements. As the market continues to evolve, it will be important for investors to remain vigilant and discerning in their assessment of news and information.