Banks Butter Up Stocks

"The first leg of the rally was driven by liquidity, much like this one was, and the second leg was driven by improving fundamentals, which is what I think you're going to see as more of the stimulus effect takes hold," says Saut. "I would also point out that comparisons on an earnings basis are going to get pretty darn easy in the third and fourth quarters of this year, and I think the markets will be pointing to that."

(Click below to hear my entire conversation with Jeffrey Saut, chief investment strategist at Raymond James.)

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In one of the first earnings releases of the week, Philips Electronics (PHG Quote) reported a 94% year-over-year decline in the second quarter, on a 19% drop in sales. But the biggest consumer electronics maker in Europe managed to beat estimates on an adjusted basis. Philips shares tacked on 7.1% to $19.51.

Reports from Novellus Systems(NVLS Quote) and CSX(CSX Quote) are due out after the market closes Monday. Those will be followed with reports from Goldman Sachs (GS Quote) and Johnson & Johnson (JNJ Quote) before Tuesday's open and Intel (INTC Quote) and YUM! Brands(YUM Quote) after Tuesday's close.

In other news, troubled commercial lender CIT Group (CIT Quote) said it is still in discussions regarding its participation in the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, and other liquidity solutions as it rushes to improve its near-term position. Shares slumped 11.8% to $1.35.

Also, Swiss banking giant UBS (AIG Quote) and the U.S. and Swiss governments have agreed to a 15-day suspension of litigation as they are reportedly negotiating a settlement related to the U.S. government's efforts to retrieve the identity of 52,000 U.S. account holders suspected of tax evasion. Shares rose 6.4% to $12.40.