U.S. equities fell, erasing gains as what is forecast to be the worst American earnings season since the financial crisis gets under way. The dollar tumbled to a nine-month low, boosting commodity prices.

The Standard & Poor’s 500 Index climbed as much as 0.7 percent before turning negative in the final half hour of trading. Alcoa Inc. fell in extended trade after the company, which unofficially kicks off the U.S. reporting period, lowered its forecast for global aluminum demand. Banks led European stocks higher as Italy prepared a fund to assist lenders. Oil topped $40 a barrel as a gauge of the dollar versus major peers slumped to its lowest level since June.

“The market lacks enough conviction to move stocks in any one direction for any one amount of time long enough for investors to sink their teeth into and rack up performance,” John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York, said by phone. “There is an increased amount of skepticism and concern, mostly around earnings season. It boils down to a market that has to climb a wall of worry and has to earn its gains.”

Concern that growth continues to slow even as central banks step up efforts to revitalize the world economy has sapped equities of momentum heading into the first-quarter earnings season. Analysts are projecting profits for S&P 500 companies will contract 10 percent, compared with calls for flat earnings growth at the start of the year. Japanese and European companies also begin reporting this week, with profit among members of Europe’s Stoxx 600 Index forecast to shrink in 2016, following earlier calls for earnings to improve.

David Fuller's view

This remains an uncertain time for investors and April is the last bullish month for equities, on average, before the next six months of underperformance according to the historic averages.  However, markets occasionally and inevitably differ considerably from the averages, as we saw with an abrupt wakeup call during the first six weeks of this year. 

Currently, Wall Street’s rally looks tired, judging from the S&P 500 and just about any other major US indices, other than defensive Utilities which are overbought in the short term.  Banks remain serial underperformers. 

The one really important good news development is the Dollar Index’s retreat from the higher side of its range near 100.  Had it broken decisively higher, as many people/machines were betting, economic problems would be considerably worse.  US earnings would have been under greater pressure, all but guaranteeing the recession which we may avoid this time.  Countries which had borrowed Dollars at lower levels would have been in even more difficulty.

Meanwhile, the weaker Dollar has revived interest in precious metals, starting with gold, silver and platinum.  These are discussed in more detail in the Audios. 

(See also last Thursday’s Comment of the Day on stock markets.)