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Minyanville's T3 Morning Market Call: Futures Drop Sharply After Weak Earnings, Asian Economic Data


Apple and Amazon are both in the news.

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US stock futures are sharply lower Friday along with the rest of world markets following disappointing earnings from Apple (NASDAQ:AAPL) and weaker than expected economic data from Asia. Dow (INDEXDJX:.DJI) futures are off 100 points. The market has been extremely heavy this past week as earnings season has been weaker than expected.

Much focus has been on the European debt crisis, but consistently weak data coming out of Asia for the past few months is starting to concern investors. A weak GDP number from Korea last night, slowing profitability from Chinese companies, and political gridlock in Japan preventing stimulus are being pointed to as reasons for this morning's weakness. The US will give its own picture of economic growth this morning at 8:30 a.m. ET with its GDP number, and then the Michigan Sentiment number will be released at 9:55 a.m. ET.

Apple came up short of EPS consensus estimates last in its quarterly earnings report, but has held up reasonably well despite the miss. The stock was halted during the release of the numbers last night, but the Nasdaq ETF (NYSE:QQQ) sold off sharply as the report was issued. AAPL initially opened down around 3%, but bounced hard and is set to open around flat. In the end, these AAPL earnings turned out to be just an options-premium destruction. Watch to see how AAPL reacts during the session. If it can go positive it would help the market tremendously to recover from this down open, but if it weakens it could add to the indices' woes.

Amazon (NASDAQ:AMZN) also came up short of estimates last night as the company struggles to become profitable. The stock also recovered from last night's after-hours lows, but is still set to open around 2% lower this morning.

While AAPL itself is not being punished heavily for its weak earnings report, the worse than expected results add to the narrative of globally slow growth and consumer spending. Over the last three years during the economic recovery, corporate earnings have been a rare bright spot in what has been an uninspiring bounce back in the labor market. Cost-cutting can only get a company so far, though, and after multiple years of lackluster growth our problems are starting to come home to roost. You are seeing equity investors start to extract money before the music potentially stops.

Be aware of key levels in the indices and notable stocks today, as there could be some decent spots to buy deep corrections as we enter more extreme oversold territory. The time to be greedy is when others become fearful and we pull back into major support levels.

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Scott Redler is Short SPY and Long AAPL calls.
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