By Kate Gibson

As stock investors on Monday braced for first-quarter earnings, analyst said the market reaction to the reports could well depend on whether expectations have been set low enough.

"We will see in about 10 days whether the 'less worse' economic viewpoint held by many investors and analysts extends to the first quarter earnings and the outlook offered by American CEOs of companies hit hard by the current recession," said Frederick Dickson, chief market strategist at D.A. Davidson and Co.

"We have been looking for things to get 'less bad' -- however our reading of the recent data does not yet support that view, although stock investors have taken it to heart that the bottom is now in and the only decision left is not to buy, but how much. The markets will get another test this week, as expectedly poor earnings will be reported. Maybe they'll be 'less bad' too," said Paul Nolte, director of investments, Hinsdale Associates.

Dow component and aluminum giant Alcoa Inc. (AA) reports its first-quarter results on Tuesday, the unofficial start of the earnings season.

Ahead of Alcoa's results, commercial glass provider Apogee Enterprises Inc. (APOG) and blood bank automator Immucor Inc. (BLUDE) are both scheduled to release earnings after Monday's close.

"Earnings expectations for most companies have been dramatically lowered over the last 90 days, a fact recognized in the drop in stock prices over the same period. The question is whether analysts have lowered expectations enough and whether companies meet or top the lowered performance bar," Dickson said.

In the near term, Dickson expects market pullbacks as likely to be shallow, "unless we hit a new barrier in the form of much-worse-than-expected first quarter earnings, current quarter earnings, or revenue guidance for bellwether companies."

On Monday, stocks declined for the first day in five sessions amid renewed worries about large banks, and after reports that International Business Machines Corp.'s (IBM) proposed deal for Sun Microsystems Inc. (JAVA) had fallen through.

Information technology led sector declines as the Dow Jones Industrial Average (DJI) fell 101.87 points, or 1.3%, to 7,915.72. The S&P 500 (SPX) declined 13.3 points, or 1.5%, to 829.2, while the technology-laden Nasdaq Composite shed 33.17 points, or 2.1%, to 1,588.7.