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Fake tweet shows country 'sensitive to any news that sounds like terrorism'

A stock market and a nation already on edge was temporarily knocked off its axis on Tuesday by a single fake tweet

Following a hack attack, the Associated Press' verified Twitter account posted "an erroneous tweet" claiming that two explosions occurred in the White House and that President Barack Obama is injured. Moments later, the @AP Twitter account — with nearly 2 million followers — was suspended.

"That's a bogus tweet," an AP spokesperson initially told NBC News, a statement that was repeated by the company's corporate communications account. Though the false tweet disappeared, the false message continued to exist on the service in over 4,000 retweets.

The chart of the Dow Jones industrial average just after 1 p.m. may as well have been a chart of America's heartbeat -- stopped for a moment, again, by seemingly horrific information. The Dow lost more than 140 points almost instantly, before recovering five minutes later.

It's incredible what a single 12-word lie can do.

"We're in an environment where we're sensitive to any news that sounds like terrorism," said Art Hogan of Lazard Capital Markets.  "That makes it that much more believable. That's the tricky part. When something like AP gets hacked, it becomes reality for a period of time, until it's not."

The market's reaction hints at the our collective fragility right now.  In the past, carefully crafted fake press releases or other Internet disinformation has been able to influence individual stocks both up or down.

But a single Tweet sinking the market?  It's just the latest sign that lies now spread on the Internet as fast as computer viruses, and can have just as much impact. Like the false rumors that spread like wildfire during the Boston bombing aftermath, or Hurricane Sandy before that, Twitter's surge to mainstream popularity — it now boasts 140 million U.S. accounts — has made it an incredible source of on-the-spot information, but also the world's most powerful rumor-mongering tool.

"You wonder who did it and whether it was done on purpose. It certainly was an instant implosion," said Art Cashin, director of floor operations for UBS Financial Services, who watched the minutes of bedlam on the floor of the NYSE. Cashin said the reaction was especially dramatic because it said the president was injured.

If you define the term "hacking" loosely, you might consider that whoever wrote the fake tweet hacked not only AP's account, but the entire Wall Street trading system. The trades which sank the market Tuesday were almost certainly initiated by automated trading programs designed to profit by fast-twitch reacting to good or bad news.

The combination of a jittery public, automated trading, and a worldwide rumor tool was toxic for the markets.

"That goes to show you how algorithms read headlines and create these automatic orders — you don't even have time to react as a human being," said Kenny Polcari of O'Neil Securities. "I'd imagine the (Security and Exchange Commission) is going to look into how this happened. It's not about banning computers, but it's about protection and securing our markets."

It's also about figuring out how to handle a world where the firewall between seemingly disconnected systems like Twitter and brokerage servers is really only 91 characters long, particularly a world where skepticism’s classic grains of salt seem to be in short supply.

CNBC's JeeYeon Park, Patti Domm and John Melloy contributed to this story.

Related: AP Twitter account hacked, posts false White House scare