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Market Facing Serious Weakness, Friday

The stock market could take a sharp turn lower on Friday after Microsoft , Amazon and American Express all disappointed investors in the after-hours.

Considering the Nasdaq has closed higher for the past 12 days and the S&P touched a year to date high, will these weak reports end the euphoria -- and the rally?

What’s the word on the Street?

This is a major blow to the market, says Steve Grasso. It's the day of reckoning. I don't think the rally is over but I certainly see the market moving laterally if not backward. And don’t forget that two weeks ago we were at 870 on the S&P. That’s a pretty aggressive move by anyone’s standards.

I’m not sure that it’s such a major blow, counters Karen Finerman. The way the Nasdaq has run, a pullback is healthy.

Watch the dollar overnight, adds Joe Terranova. If it rises it could signal that money is leaving equities and seeking safer havens.

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AFTER HOURS ACTION: MICROSOFT

After the bell Microsoft posted a steeper-than-expected 17 percent drop in quarterly revenue and said its business continued to be hurt by the weak global PC and server markets, sending its shares tumbling.

And on a related note, CNBC’s Jim Goldman explained that according to a WSJ report, the Yahoo! board of directors could meet as soon as late Thursday to discuss a possible deal with Microsoft.

“Microsoft needs to do something with its online strategy and this makes all the sense in the world, right now,” muses Goldman. And it worth noting, Goldman also said no outcome is likely to be announced on Thursday.

What must you know?

The revenue miss was staggering, explains Karen Finerman and we haven’t heard much about Bing. Not good.

I still think Windows 7 will be a big catalyst for the company, speculates Pete Najarian. The pullback may be an opportunity.

Chasing the search market with a Yahoo! deal is, at best, a lateral move for Microsoft, says Peter Misek of Canaccord Adams. It’s not going to help them catch Google. They’ve got to think outside the box.

Don't forget Microsoft shares only slipped to where they were on Monday, adds Oppenheimer's Carter Worth. I wouldn't read too much into it.

I think we'll see Microsoft shares above $30 long before we see them below $20, says Joe Terranova.

> Click here for complete coverage of Microsoft earnings

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AFTER HOURS ACTION: AMAZON

Amazon also slipped in extended trade after the e-tailer posted a quarterly net profit that fell by 10 percent as foreign currency fluctuations and a legal settlement hit earnings.

What must you know?

The numbers are not good, adds Joe Terranova. I’d cut down my position.

I don’t understand why Amazon is struggling so when eBay did so well, adds Pete Najarian. There’s a disconnect somewhere.

eBay trades at 14 times earnings while Amazon trades at over 40 times earnings, explains Karen Finerman. That’s why one popped and one didn't.

> Click here for complete coverage of Amazon earnings

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AFTER HOURS ACTION: AMERICAN EXPRESS

American Express, the largest credit card company by sales, reported lower quarterly earnings on Thursday, hurt by weakness in cardmember spending, record credit losses, restructuring charges and the repayment of government funds.

What must you know?

This is another stock that’s had a huge run, reminds Karen Finerman. I’m not sure it was such as terrible report. The stock pulled back after hours because the expectations were just too much.

> Click here for complete coverage of American Express earnings






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Trader disclosure: On July 23rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (MCD), (AXP), (AMZN), (MSFT), (QCOM), (SUN), (FTO), (SU), (GS), (APA), (GOOG), (IBM), (INTC), (XBI), (BNI); Finerman Owns (RIG); Finerman's Firm Owns (MSFT), (NOK), (PBR), (RIG), (WMT); Finerman's Firm Is Short (USO), (IJR), (IYR), (IWM), (MDY), (SPY); Finerman's Firm Owns (WFMI) Calls; Finerman's Firm And Finerman Own (BAC) Preferred Shares; Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Grasso Owns (BAC), (BA), (COST), (CSCO), (V), (WMT), (CLF); Grasso's Company Owns (ABT), (MSFT), (GERN), (NYX), (XOM), (SDS); Grasso's Company Is Short (QQQQ)

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