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Market Test--Can It Move Up On Bad Earnings?

Futures are down in reaction to the poor earnings guidance we have seen from Dupont,Texas Instruments, Sandisk, and Sun Micro, among others, but the swing in the futures pre-open has been only 18 points, well below the 50-point spreads we have seen in the past few weeks.

Overnight, three month Libor dropped below 4 percent to 3.83 percent. The dollar index rallied to a new 18 month high, which is hurting commodities again. Copper is down 5 percent this morning.

While lower copper is good news for many industries like home builders, it is a huge problem for a firm like Freeport-McMoran, which this morning reported earnings and revenues a bit below expectations.

They did not give guidance, but noted "significant uncertainty" about the near-term price outlook for copper and gold. Down 6 percent pre-open.

"Significant" is an understatement. Freeport said copper prices averaged $3.49 a pound during the third quarter, dropped to $2.89 at the end of the quarter, and this morning is $2.01.

Other than earnings, the most important event today is that the Lehman credit default swaps are supposed to be paid off--we have no idea how much was actually bought as insurance, how much as speculation, nor the exposure of the big firms.

On earnings:

1) Caterpillarmissed earnings, revenues above expectations, however stock is up because they reiterated 2008 full year guidance (about $6.00), however the expectations for 2009--flat with 2008--are a bit below expectations of $6.15. CEO Jim Owens said, "the timing and strength of the recovery are very uncertain."

2) Dupont beat, but lowered guidance for the full year (to $3.25-$3.30, from $3.45-$3.55), based on weakened demand in North America and Europe, which is two-thirds of their business. Down 5 percent pre-open.

3) MMMbeat, full year estimate is $5.40-$5.48, in line with estimates of $5.45. This was a good report given the environment, with continued growth in international operations. Up 2 percent pre-open.

4) Lockheed-Martin beat, and their guidance for the rest of the year is above their prior guidance, but 2009 guidance is below expectations. Down 5 percent pre-open.

4) American Express beat expectations and is trading up about 4 percent pre-open. Mastercard and Visa are both trading up in sympathy. But don't get too excited: AmEx was at a 10-year low on Thursday, so this is just a small bounce from a dramatically oversold level. Amex saw a further slowing in October and said the difficult economic environment will extend into 2009.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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