Investor focus is now on corporate earnings.

Alcoa (AA) kicked off the first quarter 2016 earnings season after market close on April 11.

The aluminum producer earned 7 cents a share beating analysts' 2 cents a share forecast.

Alcoa however cut its 2016 growth estimates for global aerospace sales, aluminum demand, and heavy-duty truck & trailer production.

Investors were not impressed.

Alcoa stock lost 2.7% of its value the following day.

According to FactSet Research, analysts currently forecast S&P 500 companies to earn 9.1% less than they did in the year-ago period.

This is easily the weakest aggregate forecast since the financial crisis.

Analysts expect growth in only three of the 10 sectors: telecom services, consumer discretionary, and health care.

They predict profits to fall in the remaining sectors including double-digit declines in financials, materials, and energy.

In many respects, first quarter earnings growth expectations by sector are quite similar to where expectations stood at a similar point for the fourth quarter. See: Sector Analysis: Will Q4 2015 Earnings Reports Bail Out Stocks?.

Profit growth in Q1 2016 is expected to be limited to the same sectors where profit growth was expected in Q4 2015 with one exception: the financial sector. Analysts expected profits for financials to grow 6.7% in the Q4 2015. In contrast, they expect the sector's profits to drop 10.9% in Q1 2016.

What's Ahead for Stocks

Companies have a history of beating quarterly earnings forecasts made at the start of the reporting season. Assuming earnings outperformance is inline with historical averages, first quarter earnings would be 5-7% below the year ago tally compared to expectations of a 9.1% decline.

If profits do drop in Q1 2016, as they look set to, this will mark the first time the S&P 500 index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009.

Stocks may very well rally during the Q1 2016 reporting season in the face of falling profits as they did during the Q4 2015 reporting season.

The rally is however likely to lose steam as investors question the appropriateness of pricing S&P 500 stocks at 16.7-times their forward 12-month earnings forecast particularly at a time when profit growth is proving elusive.

It may not be a bad idea to take a few chips off the table if the rally does materialize during the Q1 2016 earnings reporting season.