US STOCKS - Wall Street falls ahead of earnings

                                
 * Banks fall after news of an IMF report on toxic assets
                                
 * Alcoa slides before earnings
                                
 * RBC upgrades Microsoft, seven others
                                
 * Dow off 2 pct, S&P 500 off 1.8 pct, Nasdaq off 1.6 pct  
                                
 * For up-to-the-minute market news click [STXNEWS/US]
                                
 By Chuck Mikolajczak
                                
 NEW YORK, April 7 (Reuters) - U.S. stocks fell on Tuesday
as investors braced for what is expected to be another dismal
earnings season and fresh worries surfaced over the amount of
toxic assets on bank balance sheets.
                                
 Bank shares declined after it was reported the
International Monetary Fund was set to forecast toxic assets on
the balance sheets of financial corporations could reach $4
trillion. For more, see [ID:nT186243]
                                
 Jitters regarding financial companies have resurfaced as
investors also gird themselves for a weak round of earnings,
starting with Alcoa Inc <AA.N> after the close today. Alcoa
shares fell 3.7 percent to $7.61 ahead of the release of their
results.
                                
 Earnings for S&P 500 companies are expected to fall by 36.7
percent, according to Thomson Reuters data.
                                
 The slide in bank shares comes after stocks rallied off
12-year lows in the last month, fueled in part by reassuring
comments from major banks about their performance in the
beginning of the year. The KBW Bank <.BKX> index shed 1.5
percent.
                                
 "People are scaling back their exposure to equities in
front of earnings season," said Dan Greenhaus, equity
strategist at Miller Tabak & Co in New York.
                                
 "We've had a very nice run-up here and I think at this
stage of the game with earnings season looming and a lot of
uncertainty on that front people are scaling back their
exposure in preparation of what might be a choppy earnings
season."
                                
 The Dow Jones industrial average <.DJI> dropped 157.62
points, or 1.98 percent, to 7,818.23. The Standard & Poor's 500
Index <.SPX> dropped 15.34 points, or 1.84 percent, to 820.14.
The Nasdaq Composite Index <.IXIC> dropped 26.01 points, or
1.62 percent, to 1,580.70.
                                
 Energy stocks Chevron <CVX.N> and Exxon Mobil <XOM.N> were
among the top drags on the Dow as U.S crude oil futures fell
below $50 a barrel on a stronger dollar and caution ahead of
inventory data.
                                
 Chevron fell 2.1 percent to $68.40 while Exxon Mobil
dropped 2.6 percent to $68.24.
                                
 Microsoft, <MSFT.O> which rose 1.3 percent to $19.01, was
the top performer on both the Dow and Nasdaq 100 after RBC
Capital Markets upgraded the company to "outperform" from
"sector perform" along with seven other software companies,
citing more reasonable valuations and a decreased risk to
negative earnings revisions.
                                
 Also on the research front, Citigroup upgraded American
Express <AXP.N> to a "hold" from a "sell" on a more balanced
risk to reward basis. Shares fell 0.07 percent to $15.06.
                                
 In a separate note, the firm said that it had downgraded
the United States equities market to "underweight," as the firm
prefers to increase exposure to the European and Asian markets
as they expect them to perform better.
                                
 Despite recent declines, the S&P 500 is up more than 21
percent since hitting a bear market closing low on March 9, as
hopes rose the economic slump is moderating and banks are
stabilizing as policy-makers continue an aggressive campaign to
shore up the system.
                                
 (Additional Reporting by Ellis Mnyandu)
 (Reporting by Chuck Mikolajczak; Editing by Theodore
d'Afflisio)