Stocks slip as earnings season kicks off

Stocks kicked off the week lower Monday as Wall Street braced for the start of the corporate earnings reporting season.

All three major benchmarks started the day comfortably in in positive territory, before scaling back those gains in mid-morning. About mid-afternoon, they faltered into negative territory, ending at session lows at the 4 p.m. ET close.

The Dow Jones industrial average lost 0.1%, a 21-point drop; the S&P 500, 0.3%; and the Nasdaq composite, 0.4%.

Don't just blame energy for ugly earnings

If earnings come in negative in the January-March quarter as expected, it will mark the third straight quarter of negative growth. Profits were hurt by financial turbulence, a strong dollar that hurt sales of U.S. multinationals and the continuing fallout from low prices in the energy patch.

Wall Street analysts expect another tough quarter for earnings, with current projections calling for profits to contract nearly 8%.

Wall Street hope: 1Q profits to mark trough

The unofficial kickoff to earnings season came after the closing bell when aluminum giant Alcoa (AA) reported mixed results. Its stock tanked more than 3% in after-hours trading.

Gina Martin Adams, equity strategist at Wells Fargo, says expectations are as low as the profit estimates themselves.

"Not so great expectations" is the way she summed up the first-quarter earnings season in a note to clients. "If analyst estimates are correct, it is likely to be the worst quarter of earnings-per-share results thus far this cycle."

Still, Wall Street is not totally downbeat on earnings, as investors think profit expectations have been cut so much that companies will be able to top lowered expectations. There is also a camp on Wall Street that sees the first quarter as the low point, or trough, for earnings in the current cycle.

Adams says she will be closely watching financials, commodities and the impact of the dollar on corporate profit results. Financials face continued headwinds due to a small gap between short-term and long-term interest rates, as well as early-year market turbulence that negatively impacted trading results. And despite a sharp recovery in energy prices, analysts continue to mark down earnings in the energy sector. A bright spot, however, could be the recent drop in the value of the dollar, Adams wrote.

CEO ‘outlook’ is key to earnings season

What corporate CEOs say about the future could be the biggest determinant of whether Wall Street is sold on the theory that the first-quarter will mark the low point for earnings, Adams adds.

"Analyst estimates suggest the trough in earnings occurred in the first quarter, a theory likely to be heavily tested by company commentary," Adams told clients.

Heading into the new week, the Dow was up nearly 1% for the year and the S&P 500 was 0.2% higher.

Oil helped give stocks a lift again as a barrel of U.S.-produced crude crossed over $40, rising 1.7% to about $40.40. The last time oil closed above $40 was on March 22, the day it set is 2016 closing high of $41.45.

Stocks were trading mostly higher overseas. In Europe, the broad Stoxx Europe 600 was up 0.6%, the German DAX was 1% higher and the CAC 40 in Paris was up 0.6%.

Stocks, aside from Tokyo, were higher in Asia. Japan's Nikkei 225 closed down 0.4%. But the Hang Seng index in Hong Kong rose 0.4% and shares in mainland China's Shanghai composite index rose 1.6%.

Adam Shell on Twitter: @adamshell.