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After a 10 percent rebound off the Christmas Eve low, the S&P 500 is bumping up against a major area of resistance at 2,600 as earnings season begins. The S&P 500 was trading slightly lower at around 2,590 on Friday afternoon.

“In our view the bulk of the decline is clearly behind us,” said Julian Emanuel, chief equity and derivatives strategist at BTIG. Earnings could boost the overall market, but there are also geopolitical and other factors that could affect stocks. “It wouldn’t be a shock give the stiff resistance around 2,600 that it could pull back a ways.”

Emanuel said he switched last week from a posture of buying on the dips to buying the market. “We are not in a bull market fully yet. We are in a transition stage. You switched from both bad news and good news being sold in the last quarter to good news being bought, but if you’re really in a bull market, both good news and bad news is going to be bought.”

The market is expected to remain volatile, and could be choppy during earnings season because its surge higher was so sharp and swift.

“We thought earnings season would still be a net beat but with more mixed results,” said Keith Parker, chief equity strategist at UBS. “The key will be about 2019 guidance and what we’ve seen thus far is revisions to 2019 a bit more than the post-crisis average…The big bar reset typically happens during the first quarter, during fourth quarter reporting. We already saw expectations drop down a lot.”

Analysts expect that most of the bad news is out on earnings, but if the results and comments are worse than expected, the market could easily retest its lows. On the other hand, if earnings are better than expected, they could act as a positive force to help fend off further declines, strategists said.

“Our view is we’ll probably have more mixed results and guidance going into the quarter, but it does raise the likelihood of relief rallies, given where positions and expectations are,” Parker said. He said health care could be a positive.

“Health care has positive revision trends. We think they have a better earnings, sales backdrop,” he said,, noting that in consumer discretionary, lodging and restaurants stand out.

Earnings are expected to be strong, up 14.7 percent in the fourth quarter, but the fourth quarter is a transition period. Corporate executives could find themselves showing off double digit profit growth, while discussing the activity in the current quarter, which is expected to see much slower profit growth. First-quarter earnings are expected to be up around 3.9 percent, according to Thomson Reuters. Earnings in 2018 were up about 23.5 percent, but 2019 gains are expected to average just under 7 percent for the year.

BTIG’s Emanuel said the market may be ready to reward positive news, and the biggest winners could be those that beat expectations for revenue and profit. Emanuel said in the last two earnings seasons, many companies that beat were hardly rewarded while those that missed on both profit and revenue fell an average 3.2 percent in the July period and 5 percent in October’s reporting season.

Source: BTIG

“Estimates have come down quite sharply for the quarter and the year. It’s a mixed bag in that you’ve seen a raft of pre-announcements. You’ve seen positive reactions, negative reactions. The positive reactions have been skewed toward more cyclical companies. You’ve seen the worst reactions for some of the most defensive names,” he said.

In order to find possible earnings winners, BTIG analysts screened for companies that were down 20 percent from their 52-week highs, but in the past two years had beaten on earnings and revenue and their stocks were rewarded.

Among those names were Morgan Stanley, which reports Thursday, Ralph Lauren, LAM Research, Akamai and Northrop Grumman.

BTIG said vulnerable names could be those that haven’t declined that much but that have missed on earnings in the past. They screened for stocks which have disappointed on both earnings and revenue during two or more quarters since the first quarter of 2017 and have declined less than 10 percent from their year highs.

On that list are Walt Disney, Hershey, American Water Works, American Electric Power, AutoZone, Duke Energy, Ameren, Ecolab, NextEra Energy, Varian Medical Systems, First Energy and TransDigm.

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Putin’s missile with ‘unlimited’ range is too expensive and hasn’t flown more than 22 miles



Putin’s push to develop weapons of this caliber has sparked concerns of a budding arms race among China, the U.S. and Russia.

What’s more, the latest revelations come a little more than a year after the Russian leader touted his nation’s growing hypersonic arsenal. Of the six new weapons Putin unveiled last March, CNBC learned that two of them, a hypersonic glide vehicle and air-launched cruise missile, will be ready for war by 2020.

The hypersonic glide vehicle, dubbed Avangard, is designed to sit atop an intercontinental ballistic missile. Once launched, it uses aerodynamic forces to sail on top of the atmosphere.

One U.S. intelligence report, according to a source, noted that the hypersonic glide vehicles were mounted to Russian-made SS-19 intercontinental ballistic missiles — and one test featured a mock warhead.

Previous intelligence reports, which were curated last spring, calculate that Avangard is likely to achieve initial operational capability by 2020, a significant step that would enable the Kremlin to surpass the U.S. and China in this regard.

The hypersonic cruise missile dubbed “Kinzhal,” which means “dagger” in Russian, has been tested at least three times and was mounted and launched 12 times from a Russian MiG-31 fighter jet.

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US slaps sanctions on Venezuela bank Bandes after Guaido aide’s arrest



Venezuelan President Nicolas Maduro meets with UN chief Ban Ki-moon at the United Nations headquarters in New York on July 28, 2015.

Spencer Platt | Getty Images News | Getty Images

Venezuelan President Nicolas Maduro meets with UN chief Ban Ki-moon at the United Nations headquarters in New York on July 28, 2015.

The United States imposed sanctions on Venezuela’s development bank Bandes, a day after the Trump administration warned there would be consequences for the arrest of opposition leader Juan Guaido’s top aide.

The U.S. Treasury said it was slapping the sanctions on the Banco de Desarrollo Economico y Social de Venezuela, including its subsidiaries in Uruguay and Bolivia.

“(President Nicolas) Maduro and his enablers have distorted the original purpose of the bank … as part of a desperate attempt to hold onto power,” U.S. Treasury Secretary Steven Mnuchin said in a statement announcing the action.

Guaido, who invoked the constitution to assume the interim presidency in January, has accused Bandes of being used by officials of Maduro’s government to steal funds.

The U.S. Treasury said Maduro tried to move $1 billion out of Venezuela through Banco Bandes Uruguay in early 2019.

Bandes has received billions of dollars over the past decade from the China Development Bank, in exchange for oil, which the Venezuelan government used to fund infrastructure projects.

The sanctions freeze assets belonging to the bank and its subsidiaries, and prevent U.S. citizens from any dealings with Bandes.

The announcement comes after Venezuelan authorities detained Guaido’s chief of staff, Roberto Marrero, on Thursday in a pre-dawn raid, sparking vows of reprisals from the United States, which backs Guaido.

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Brazil shares tumble after arrest of former president Temer



Brazilian stocks fell sharply on Friday as the arrest of the country’s former president, Michel Temer, sparked worries that government debate over key fiscal reforms may be delayed.

The iShares MSCI Brazil ETF (EWZ) dropped 3.9 percent and was headed for its worst day since Feb. 6, when it fell 4.2 percent. The Bovespa index, Brazil’s benchmark index, fell about 2 percent after hitting an all-time high earlier this week.

Temer was arrested in Sao Paulo on Thursday, with prosecutors alleging he was the head of a “criminal organization” that took more than $470 million in bribes or kickbacks.

Temer already faced ongoing criminal investigations against him before leaving the presidency. However, his arrest comes as current President Jair Bolsonaro tries to push forward major changes to the country’s pension system, which investors largely bet will happen.

“The key question is whether or not his arrest affects pension reform. In theory it shouldn’t,” Dirk Willer, head of emerging market strategy at Citigroup, said in a note. However, “the period between the unveiling of the pension reform and approval by the special house committee will be filled with much noise and headline risk. [Thursday’s] news was a good example of the sort of headline risks one should expect over the next months when pension reform makes its way through congress.”

Brazilian stocks surged to start the year amid hopes the Bolsonaro administration would pass key changes to the country’s social security system. Brazil’s generous pension system effectively lets citizens retire in their 50s. This has led to massive government debt, which has stymied consistent economic growth in Brazil.

But while investors are still betting on some sort of reform taking place, they are realizing it could be a bumpy ride. On Wednesday, Bolsonaro unveiled a military pension reform plan that would save just $265 million on average over the next 10 years. These savings are well below those proposed by the country’s Economic Ministry.

But it is key for Bolsonaro’s broader pension-reform efforts as lawmakers indicated they could not debate the matter until they saw the president’s plans for military pensions.

Now, Temer’s arrest could delay that process even further depending on how his party — which holds 34 seats in the lower house — reacts, Citi’s Willer said.

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