* Bogus AP tweet causes 5-second drop, VIX briefly jumps
* Netflix shares up 25 pct
* Dow up 0.8 pct, S&P 500 up 0.9 pct, Nasdaq up 1 pct
By Caroline Valetkevitch
NEW YORK, April 23 (Reuters) - U.S. stocks sharply cut gains
before bouncing back on Tuesday following a "bogus" Associated
Press report about explosions at the White House.
The benchmark S&P 500 dropped 14 points to as low as
1,563.03 before recovering, all in about five seconds. An AP
tweet, which an AP spokesman said was "bogus," had said there
were two explosions at the White House.
"We see this every time this type of news comes out:
liquidity evaporates quickly. High-frequency traders cancel
their orders on even one little tweet," said Dennis Dick,
proprietary trader at Bright Trading LLC in Las Vegas. "They
provide so much liquidity and don't have obligations like market
makers did in the past."
Investors are also on edge following two fatal explosions
last week at the Boston Marathon that led to a lockdown in
Boston on Friday as police hunted for one of the suspects.
The Dow Jones industrial average was up 120.65
points, or 0.83 percent, at 14,687.82. The Standard & Poor's 500
Index was up 13.77 points, or 0.88 percent, at 1,576.27.
The Nasdaq Composite Index was up 32.90 points, or 1.02
percent, at 3,266.46.
Among the day's biggest gainers, Netflix Inc shares
jumped 25 percent to $217.68, a day after reporting earnings
that beat expectations and strong subscriber growth.
Market volatility had eased this week after last week's big
increase in CBOE Volatility Index, or VIX. It hit an
intraday peak of 14.87 after the bogus tweet before erasing the
gains, said WhatsTrading.com options strategist Frederic Ruffy.
Ruffy also noted option interest in companies that make
security software. "There was a buyer of 3,000 September
out-of-the-money $20 strike calls on Fortinet at about
1:30 p.m. ET," Ruffy said.