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The Morning Drags

Futures drop as traders lighten up on crowded longs. S&P futures weakened after 6:30 AM, when our parent General Electric came out with earnings, and have weakened further as the morning has gone on.

Note that this is an options expiration morning and may be an influence on trading this morning.

It's not that the overall earnings are disappointing, though Bank of America was below consensus. It's that the big names are all "crowded longs." Traders have held onto these big names because they saw any attempt at shorting or outright selling was a disastrous strategy in Q3. And they were rewarded: BAC up about 28 percent, GE up 40 percent , IBM up 15 percent.

But that was last quarter, and with earnings out it's a reasonable bet to lighten up on some positions.

Look at IBM, down 5 percent pre-open...after the close the tech giant reported earnings better than expected and said earnings for the fourth quarter would also be higher than previous guidance...what happened? It's just getting harder to move IBM up, after 15 percent moves in less than three months...earnings and guidance were strong, but it would have to be really strong to get a boost after that kind of move

Elsewhere:

1) Bank of America greater than expected loss ($0.26 loss, consensus loss of $0.31).

But don't look at the earnings. It gets down to this: do you believe in the "improving credit quality" story? If you do, Bank of America is a stock to hold, because it is so exposed to the consumer. Bulls point to the company's credit card data from September, which showed only a very slight tick up from August, and to lower reserve build, as signs that credit are stabilizing. Bears laugh at this, insisting the numbers do not support any sign of an imminent uptick.

2) Shares of our parent General Electric are down 3 percent pre-open. Earnings beat estimates, as 4 percent growth in its media and industrial profits offset continued weakness in its financial operations of GE Capital, where profits fell 87 percent.

The problem for GE: the Street was expecting better topline results, and the firm ultimately disappointed. Revenues fell more than expected by analysts (down 20 percent vs. down 16 percent est.) amid a 30 percent drop in GE Capital revenues.

Despite the grim results out of GE Capital, CEO Jeff Immelt said that although a "tough environment" remains for the division, the company is "seeing signs of stabilization" as every segment outside of its real estate operations was profitable at GE Capital.

3) Oil services giant Halliburton reported earnings and revenues above consensus. Regardless, profits were 61 percent below that of a year ago, much of it because demand for oil services slumped as natural gas prices went from about $8 per million BTU in Q3 2008 to $3 to $4 per million BTU Q3 2009.

What Halliburton needs now is a pickup in rig counts. There are signs that the international markets are indeed improving.

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