The market started the busiest week of the earning season in a rather lackluster tone. The Dow swung around the unchanged level for most of the day before ending the session with a loss of 23 points. The Nasdaq, the worst performer of the three, had a loss of 0.6%. Wachovia became the latest financial firm that posted disappointing Q1 results while news on the economic front was more or less in line with expectation.

Financials continued to lag behind the broad market and it has dropped for 5 consecutive sessions. It seems that analysts on average are too optimistic about Q1 earnings for this group. We are going to get reports from JP Morgan, Wells Fargo, Merrill and Citigroup throughout the rest of the week and it is very likely we may see more earnings disappointments. There is no question that Q1 is a tough one for many financial firms but the key is whether Wall Street is willing to look past it. We may have a better idea by the end of the week. Commodities, buoyed by advancing CRB commodity index, continued to do well. The US dollar was headed lower despite a short-lived rebound from the G7 statement over the weekend. Treasuries were drifting down with the yield curve continuing to steepen. Interestingly, banks remain cautious of lending to each other despite enormous liquidity injected by the Fed. In other words, the worst of the financial crisis may be over, but the road to recovery will be a bumpy one.