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Bulls Are Hopeful

Futures are higher this morning on a combination of optimism over a CIT deal, better earnings, and a bullish call from Goldman Sachs.

The S&P is on the verge of breaking outto new highs for the year. The S&P 500 closed the week at 940, just shy of the June closing high of 944.

So all we need is 4 more points and we will be at the highest level since November.

Bulls are hopeful that optimism over earnings will put us over the top. A higher percentage of companies have beaten estimates so far (about 71 percent) than normal (about 60 percent), but it is still very early in the season. Earnings are beating due to cost control, but notable revenue surprises are far fewer.

A good example of this optimism is Goldman Sachs call for a higher year-end S&P 500 price target. Declaring that "we expect a sustained rally," Goldman Sachs has raised its year-end S&P 500 price target to 1060, 13 percent above the current 940 level.

They base their call on sequential improvement in earnings (ex-financials), and higher forward EPS guidance. They are arguing for an overweight in cyclicals (energy, materials, financials, tech, and industrials), and underweight defensive sectos (donsumer staples, healthcare, telecom).

Elsewhere:

1) We are reporting that CIT's board has approved a $3 billion financing package from bondholders. An officials announcement is expected some time this morning.

2) Despite earnings beat, oil service firms are sounding a very cautionary note this morning.

Halliburton beat on the bottom line ($0.30 vs $0.27 consensus) and topline: $3.49 billion vs. $3.41 billion consensus and is trading up 4 percent pre-open. Despite the beat, the drop in demand for natural gas is making them cautious: they think a meaningful recovery in prices is unlikely, so drilling activity is likely to be subdued.

Weatherford ( also reported earnings below expectations ($0.10 vs. $0.16 consensus ) and is trading down 8 percent this quarter.

3) Diversified manufacturer Eaton reported earnings better than expected ($0.23 vs. $0.14) but topline of $2.9 bl was lighter than expected at $2.99; guidance of $0.90-$1.00 for the third quarter is within the range of $0.92. They are sounding a cautious note, expecting end markets to decline 21 to 22 percent, vs. earlier forecasts of 15 to 16 percent decline.

4) Ruby Tuesday down 10% pre-open after the restaurant chain announced they are offering at least 10 million shares of common stock. The company says proceeds will be used to pay down debt. The offering will dilute shares outstanding by about 19%. Just months ago, Ruby Tuesday shares were trading at a low of $0.85 on worries of a possible bankruptcy arose. Shares rebounded after those fears were quelled.

5) Shares of Human Genome Sciences skyrocketing over 200% in pre-market trading and GlaxoSmithKline up 5% after announcing positive Phase 3 study results for Benlysta in treating Lupus. In a placebo-controlled study, the results showed that belimumab (the generic name) plus standard of care achieved significant improvement in patient response rate at week 52, compared with standard of care alone. HGS CEO says, "Benlysta has the potential to become the first new approved drug in decades for people living with systemic lupus." In fact, no new Lupus drugs have been brought to the market in over 40 years.

Human Genome Sciences profits fromt he drug would be split between Human Genome and partner GlaxoSmithKline.

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