Trump tweets, traders jump on it
Computer algorithms capture his words and buy, sell affected stocks.
The jaw- dropping speed at which certain stocks have moved in response to Donald Trump’s tweets about corporate America makes it seem as if Wall Street already was waiting for the president-elect’s words. It was. Some sophistic ated traders with automated programs are using computer algorithms that instantly capture Trump’s Twitter remarks and then immediately 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 those traders, he said. Instead, the company culls the 500 million tweets issued daily on Twitter to find comments from influential people such as Trump that could affect stocks and then immediately relays that “sentiment” data to traders.
Wall Street is tight-lipped about which firms use the automatic trading programs in their bid to profit from Trump’s tweets, and it’s unclear how much of the stocks’ trading volume reflects the automated trades.
Representatives from venerable 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, a well-known automated trading firm that also operates a hedge fund. Gits likewise said he was not at liberty to disclose the names of traders using such automated programs.
The secrecy isn’t surprising because firms employing the programs, which try to profit from even modest point spreads on high-volume trades, don’t want to reveal their advantage, said Josh Brown, chief executive of Ritholtz Wealth Management 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.”
Fo r ave r a ge i nve s t o r s , t he instant post-Trump market moves 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, there’s surging interest even among investors who don’t rapidly trade stocks to be immediately notified when a new Trump tweet appears.
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 taken to the social media platform to criticize 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 attacked the defense firms for the high costs of certain aerospace programs, and he railed against the car companies for building vehicles in Mexico that are sold in the U.S.
In each case, the companies’ stocks dropped immediately after Trump’s comments appeared on his Twitter feed.