Earnings season kicked off Monday, and investors are bracing for some fairly ugly results, especially in the beaten-down financial sector.
Aluminum producer Alcoa, the first Dow component to report for the quarter,
posted earnings after the bell that came up short of analysts' consensus estimates, but shares rose slightly as the company's sales beat forecasts.
Wall Street analysts recently lowered earnings estimates for Alcoa, but said they expected the company to benefit from higher aluminum prices later in the year.
Overall, earnings estimates for the first quarter have fallen sharply since the period began, largely because of growing evidence the US is falling into a recession.
Profits for the Standard & Poor's 500 companies are now expected to be down 12.6% from a year ago, according to Thomson Financial. That compares with a 9.9% drop expected just last week and a 1.6% decline forecast a month ago.
The financial sector alone is expected to show a whopping 61% decline in earnings.
The rest of corporate America, however, is doing considerably better, with expectations for a 7.2% increase in earnings.
Among the best sectors, energy is expected to soar 28%, tech 8% and industrials 6%.
Among the worst (other than financials), consumer discretionary companies are expected to see a 12% decline in earnings, while consumer staples are forecast to be down 1%.
Other notable companies set to announce quarterly results this week include No. 2 consumer electronics chain Circuit City Stores and home-goods retailer Bed Bath & Beyond, both on Wednesday. Drugstore chain Rite Aid announces results on Thursday.
(See more on earnings winners and losers in the CNBC video at left.)
Chain stores have struggled with declining customer traffic as consumers facing higher prices for gas and food cut back on nonessential items. Even the deepest discounters are feeling the impact. Family Dollar Storesreported a sharp drop in quarterly profit on Friday and cut its full-year earnings forecast, blaming deteriorating economic conditions.
"I'm skeptical about a recovery in consumer discretionary," said Subodh Kumar, chief investment strategist of Subodh Kumar & Associates in Toronto. "I think the consumer is in a phase of rebuilding savings."
Retailers will get particular attention on Thursday, when a slew of them, including Target , Kohl's and Gap, report monthly same-store sales.
Conglomerate General Electric, another Dow component and a bellwether for the economy, caps off the week, delivering its earnings on Friday. GE is the parent company of CNBC and CNBC.com.
--Reuters contributed to this report.