World stocks eased on Monday while the euro fell broadly as investors grew cautious ahead of a slew of key U.S. corporate earnings and details of tests on European banks' financial health.
While second-quarter earnings are expected to come in strong, investors remained concerned about Europe's fiscal issues and the health of its financial sector ahead of the stress tests on the continent's banks.
U.S. investors are focused on Alcoa Inc's (AA.N) results released after the market closes, marking the unofficial start of earnings season.
While Alcoa, the first Dow component to report earnings, is expected to swing to a profit in its second quarter, analysts have been cutting their estimates for the firm due to falling aluminum prices.
The focus is on Alcoa and earnings, and there's a little bit of anxiety, especially since we're coming off such a strong week, said Peter Cardillo, chief market analyst at Avalon Partners in New York.
The European tests and prospects for financial regulation here are also weighing on things a bit.
The Dow Jones industrial average .DJI was down 17.94 points, or 0.18 percent, at 10,180.09. The Standard & Poor's 500 Index .SPX was down 3.22 points, or 0.30 percent, at 1,074.74. The Nasdaq Composite Index .IXIC was down 2.40 points, or 0.11 percent, at 2,194.05, following its best week in a year
This week's key earnings include Alcoa (AA.N), Intel (INTC.O), JP Morgan (JPM.N), Google (GOOG.O), Bank of America (BAC.N), GE (GE.N) and Citi (C.N).
The MSCI world equity index .MIWD00000PUS moved lower, down 0.3 pct to 280.42. The Thomson Reuters global stock index .TRXFLDGLPU also turned negative.
The FTSEurofirst 300 index .FTEU3 rose 0.73 percent with BP (BP.L) surging as traders pointed to a squeeze and on optimism it can sell assets and make progress containing an oil spill in the Gulf of Mexico.
Thomson Reuters data shows earnings of S&P 500 firms are expected to grow 27 percent in the second quarter from the previous three months, after expanding at a rate of 58.3 percent in the January-March period.
So far, with 26 of 500 firms already reported, 69 percent of earnings came in above expectations.
The euro fell 0.41 percent to $1.2582, pulling away from last week's two-month high as concerns about the effectiveness of stress tests on European banks prompted investors to trim long positions in the single currency.
The stress tests are being performed on 91 European banks with results due on July 23, a major step as the European Union seeks to restore confidence in the sector.
In the near term, the euro could suffer from any disappointment triggered by the stress tests, said Gareth Berry, a currency strategist at UBS AG.
The yen briefly slipped after Japan's ruling coalition lost its upper house majority in Sunday's election, putting the government's policies to deal with the country's massive debt at risk.
Treasuries were little changed ahead of the first of this week's $69 billion worth of bond auctions. The Treasury will auction $35 billion of three-year notes at 1 p.m. (1700 GMT), the first of three sales which also include 10-year notes and 30-year bonds.
The benchmark 10-year U.S. Treasury note was up 3/32, with the yield at 3.0465 percent. The 2-year U.S. Treasury note was unchanged, with the yield at 0.634 percent. The 30-year Treasury bond was up 8/32, with the yield at 4.020 percent.
Analysts also are keeping a close watch on the auctions as the bond market remains relatively expensive after a three-month rally that has pulled benchmark yields below 3.0 percent from more than 4.0 percent at the start of April.
U.S. crude oil fell 1.87 percent to $74.70 a barrel ahead of corporate results.
(Additional reporting by Ryan Vlastelica, Vivianne Rodrigues and Burton Frierson in New York; Editing by Theodore d'Afflisio)