How'd Zuck Do? Who Cares, It's All About Syria Now: Taking Stock

(Bloomberg) -- S&P futures are already giving back almost half of yesterday’s big run, the VIX is starting to tick higher, and crude continues to break out (Brent now well above $71/bbl) as the drumbeat gets louder over possible U.S. involvement in Syria.

And just as 7am crosses, Trump tells Russia via Twitter to “get ready,” because missiles are coming at Syria.

There wasn’t a ton of news out otherwise besides further details over China President Xi’s pledges, CNN reporting that Trump is considering firing Deputy Attorney General Rod Rosenstein, and a seemingly disappointing data point in the agriculture machinery space in Deere’s monthly sales figures.

How’d Zuck Do?

The early market gains from Xi’s trade-war-soothing keynote held, for the most part, and accelerated once Zuckerberg took the stage at the first of two congressional hearings. The response was overwhelmingly positive to his cool, calm, and collected demeanor, as traders bid up Facebook (FB +4.5%) and the rest of the tech space (S5INFT +2.2%). Here’s what the Street had to say about the performance:

  • Evercore ISI analyst Anthony DiClemente, who rates FB an outperform, said Zuckerberg’s testimony was "sometimes tedious, other times repetitive, but mostly -- and this is a good thing -- uneventful"; he added that Zuckerberg delivered balanced and reasonable answers to questions and "seemed to strike the right tone" as he found plenty of common ground with the lawmakers; DiClemente saw little in the testimony that should negatively impact investors’ view of Facebook’s long-term growth and business opportunity
  • Suntrust analyst Youssef Squali, who rates FB a buy, said that while no major news emerged from the testimony, "we believe that this is a seminal event, one that’s likely to lead to increased regulation (a la GDPR)" that should still favor larger platforms like FB and GOOGL in the end

Big Move, But Still Range Bound

Energy stocks had the best day of all (S5ENRS +3.3%, biggest upside move since Nov. 2016) thanks to a continuation of the rip in crude prices. The sector has been the big winner so far in April while the defensive sectors, like utilities and REITs, and the industrials (blame Brent oil’s surge through $70/bbl for weakness in the airlines) have been clear laggards.

The market’s move to the upside was on relatively decent volumes too. They were the second highest on the consolidated tape this month, and a major bounce back from Monday, where we saw the second lowest number all year.

We closed near the high end of the S&P’s recent range, just shy of resistance at ~2,660 (while support still holds at the 200-day moving average of ~2,596) and we could see further optimism creep back into the market if we can break above this mark.

Excuses to Fade the Rally

But something we’ve become accustomed to lately is these huge swings to the upside followed by swift plunges in the opposite direction, so it’s altogether possible that investors will be looking for any excuse to fade yesterday’s move.

Perhaps day two of Zuckerberg’s grilling (scheduled for 10am) doesn’t elicit the same response as day one, and the FAANGs, the semis, and the rest of tech fade hard -- Goldman is already out slashing estimates on chip darling NVDA and sell-rated AMD, with both stocks down ~1% in pre-market trading.

Maybe the latest headlines tied to Mueller, or the Cohen raid, or possible action in Syria will spill over into the market. Or perhaps a scorching hot CPI print (today at 8:30am), after yesterday’s firmer-than-expected PPI, and some eyebrow-raising language in the FOMC Minutes (at 2pm) might help to spook the tape.

Watch the BKX for clues as we’re only two days away from the kickoff to bank earnings. And as for tech’s next major non-Facebook catalyst, it’ll be NFLX’s earnings on Monday after the close. The sell-side has been aggressively bumping up numbers over the past few days, so expectations are riding high: Morgan Stanley yesterday gave bull case $440 on higher conviction, Goldman today raised price target to $360 on a likely beat, and many others making similar tweaks to their models.

Tick-by Tick Guide to Today’s Actionable Events

  • Today -- Kerrisdale Capital expected to release a new report on a "second-rate Internet marketer," according to their Twitter feed
  • 8:30am -- March CPI
  • 10:00am -- Facebook’s Zuckerberg at House hearing
  • 10:30am -- DoE oil inventories
  • 11:00am -- STOR investor day
  • 12:00pm -- PVG investor day
  • 1:00pm -- MYL investor day
  • 2:00pm -- FOMC Minutes
  • 4:15pm -- BBBY earnings
  • 9:00pm -- COST monthly sales
  • Tonight -- Alzheon (ALZH) and Zuora (ZUO) IPOs expected to price

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