Blind Date

Story Highlights:

• Companies are set to begin reporting first-quarter earnings and outlooks after Monday's market close.
• Whether the results beat or miss expectations largely depends on where investors' earnings and outlook expectations are set—a subjective practice—and not necessarily where the economy will head in the coming months.
• Ahead of earnings reports, sentiment pushed stocks down Monday amid fresh uncertainties and fears. Bank shares were among the hardest hit.
• These slight winds of change for banks and what may be a poor earnings season heighten investor uncertainty. Investors will either be surprised to the upside or downside in the next couple weeks, and that could potentially lead to more volatility.

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Expectations can make or ruin a blind date. If expectations are too high, there's a greater likelihood of disappointment. The opposite is also true. Investors blindly waiting for first-quarter earnings reports understandably. But palms are no less sweaty and hearts are still thumping—for this earnings season may well suggest a light at the end of the tunnel from the economic slump. Or not.

Companies are set to begin reporting first-quarter earnings and outlooks after Monday's market close. Cautiously optimistic investors are hoping the results signal the economy is "less bad" than during the dismal fourth quarter of last year. Whether the results do or don't support this notion largely depends on where investors' expectations are set—a subjective practice—and not necessarily where the economy will head in the coming months.

Ahead of earnings reports, sentiment showed its market-moving muscle on Monday, pushing stocks down during the day's trading session. Bank shares were among the hardest hit. Once again, it seems uncertainty's the name of the game for banks: Treasury Secretary Geithner essentially over the weekend, suggesting those receiving "exceptional assistance" could be in for forced managerial changes. This, following the ouster of GM's CEO last week, opens the door to all sorts of speculation. Bank stocks came under additional pressure after an industry analyst forecasted US banks' loan losses to . Though loan losses are expected, the dour estimate plucks at already jittery investor nerves.

Through all this, some banks are rushing for TARP's exits, though it seems some uncertainty lies there too—apparently, banks must before paying back the funds. At the same time, for the still young Public-Private Investment Program. The Treasury is loosening some terms, clarifying others, and extending the application deadline. These moves could hint at low participation levels, calling into question the future success of the program. Though as we've said, this program now that mark-to-market rules have been revised.

These slight winds of change for banks and question marks surrounding earnings season heighten investor uncertainty. Investors will either be surprised to the upside or downside in the next couple weeks, potentially leading to more volatility—though much of that will be a function of investors' own sentiment. After all, how well a date goes is often in the eye of the beholder.