Stocks drop ahead of earnings onslaught, Fed

U.S. stocks dropped moderately Monday as investors brace for a barrage of earnings reports, a slew of fresh economic data and the Federal Reserve's decision Wednesday on interest rates.

The Dow Jones industrial average, which has finished higher the past two weeks and three of the past four weeks, closed well off its lows for the day, down 27 points, or 0.2%, at 17,977. The broader Standard & Poor's 500 stock index was off 0.2% as was the technology-packed Nasdaq composite.

Heading into the week, both the Dow and S&P 500 were still flirting with new all-time highs, with both closely followed indexes within 2% of a new record.

Fed may leave door open to June hike -- barely

The weak start to the week was caused by a combination of factors, according to Quincy Krosby, market strategist at Prudential Financial.

"Last week the market had begun to show slowing momentum .... moreover, investors punished high-profile tech names that disappointed on the top line" (in their earnings reports), Krosby told USA TODAY. "There's trepidation going into this week's Fed meeting, even though there's little expectation of a rate hike. Analysts are watching for any change in language suggesting that the Fed is looking to raise rates during the summer. Also, the Bank of Japan is meeting this week and markets are expecting -- and hoping -- to hear that the BOJ is prepared to continue with stimulus. This week is an important week for earnings with a broad range of sectors reporting. Investors want to hear that prospects for growth are picking up."

Indeed, investors will be greeted with a slew of market-moving information this week. An avalanche of first-quarter earnings reports are on tap, with 186 companies in the broad, large-company S&P 500 slated to report results, according to Thomson Reuters.

"This is the biggest reporting week for first-quarter earnings," Bill Stone, chief investment strategist at PNC Asset Management Group, told clients in a research note before the opening bell.

And while 77% of the 132 companies that have reported earnings so far have topped expectations, the profit-reporting season is still not a very good one, as profit for the S&P 500 are still expected to contract 7.1%, according to Thomson Reuters.

Earnings season has been "a bit less bad than feared," Gina Martin Adams, equity strategist at Wells Fargo Securities, said in a report. But she added that Wall Street is "still waiting for confirmation that a better earnings outlook is emerging."

The Fed breaks from its two-day policy meeting Wednesday at 2 p.m. ET and investors around the globe will be watching to see what the U.S. central bank says about the timing of its next interest rate hike. The Fed hiked rates in December for the first time in nearly a decade, but has been on hold ever since, citing international risks, persistenly low inflation and continued slack in the U.S. labor market.

Investors will also get fresh readings on a slew of economic data, ranging from March new home sales set for release today to durable goods sales Tuesday to the initial reading on first quarter U.S. economic growth.