Traders' automated systems attuned to Trump's tweets

The jaw-dropping speed at which certain stocks have moved in response to Donald Trump's tweets about corporate America makes it look as if Wall Street was waiting for the president-elect's words.

It was.

Traders with automated programs are using computer algorithms that instantly capture Trump's Twitter remarks and then buy or sell the affected stocks, analysts said.

"It's in the algorithms. They've done it," said Joe Gits, chief executive of Social Market Analytics Inc.

Gits' firm isn't among that group, he said. Instead, the company culls the 500 million tweets posted daily on Twitter to find comments, from influential people such as Trump, that could affect stocks. The company then immediately relays that "sentiment" data to traders.

Wall Street is tight-lipped about which firms use the automated-trading programs in an attempt to profit from Trump's tweets, and it's unclear how much of the stocks' trading volume reflects the automated trades.

Representatives from investment firms such as Goldman Sachs Group Inc., Morgan Stanley and Bank of America's Merrill Lynch all declined to comment. So did Citadel Securities, an automated-trading firm that also operates a hedge fund. Gits said he was not at liberty to disclose the names of any traders using such automated programs.

The secrecy isn't surprising because firms employing the programs, companies that try to profit from even modest point spreads on high-volume trades, don't want to reveal their advantage, said Josh Brown, the Ritholtz Wealth Management chief executive who also runs the Reformed Broker website.

"Nobody would share this publicly," Brown said. "Who would say, 'Yeah, this is how we're doing this, and it's working great'? But it's obvious that's not human traders."

For the average investor, the instant market moves after Trump tweets can largely be ignored, analysts said. That's because the stocks that have quickly dropped in response to Trump soon bounce back, a trend that's likely to continue, they said.

"If you're a day trader, you want to know about it, but if you're the average 401(k) investor, it doesn't make any difference in the long run," Gits said.

Nonetheless, even investors who don't rapidly trade stocks have increasingly shown interest in being immediately notified when Trump tweets.

At Bloomberg -- a major provider of market data and news, with about 325,000 of its computer terminals used by traders and others worldwide -- Trump-tweet notifications are "one of the fastest-growing alerts for a news product that we have ever launched," said Ted Merz, Bloomberg's global head of news product.

There also are new phone apps from firms such as Trigger Finance Inc. and IFTTT Inc. that quickly alert users if Trump tweets about any companies in which they own stock.

Trump, who will be sworn into office Friday, is a prolific Twitter user who in recent weeks has criticized corporate giants such as defense firms Lockheed Martin Corp. and Boeing Co., and automakers Ford Motor Co., General Motors Co. and Toyota Motor Corp.

Trump criticized the defense firms for the high costs of certain aerospace programs, and the car companies gained his attention because of Trump's opposition to building vehicles in Mexico and then selling them in the U.S.

In each case, the companies' stocks dropped immediately after Trump's comments appeared on his Twitter feed.

"The almost instantaneous movement in stock prices following some Trump tweets, most notably for Toyota, suggests to us that traders are using algorithms that execute trades immediately," Merz said.

Trump criticized Toyota on Jan. 5, tweeting his displeasure that the company plans to build Corolla cars, for sale in the U.S., at a new plant in Mexico. "No way!" he said. "Build plant in U.S. or pay big border tax."

Toyota's U.S.-traded shares quickly fell nearly 1 percent, wiping $2 billion from Toyota's total market value. But the company soon recovered some of those losses.

The software and algorithms that enable Wall Street's high-speed traders to respond automatically to Trump's tweets weren't developed specifically in the aftermath of Trump's defeat of Hillary Clinton in the Nov. 8 election, analysts said.

"It's been around for a time predating Trump," Brown said. He pointed to how past tweets by Clinton, billionaire investor Carl Icahn and Tesla Motors Inc. Chief Executive Officer Elon Musk, among others, have sparked immediate moves in stocks of companies they mentioned.

Clinton, for instance, sent biotech stocks tumbling in September 2015 after she tweeted about wanting to lower "outrageous" prices in the specialty drug market.

Business on 01/19/2017

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