Earnings season began last week amid some pretty pessimistic expectations. Thomson Financial predicts that Standard & Poor’s 500 Index-member companies will report lower profits by 12%, with financials leading the poor performance with average-anticipated-earnings declines of 60%. On cue, Alcoa Inc. (AA) kicked off the depressing season with a worse-than-expected 52% skid, and chipmaker Advanced Micro Devices Inc. (AMD) announced a downward revision in its projected revenue, accompanying the bad news with a cost-cutting initiative that includes layoffs.

United Parcel Service Inc. (UPS) also disappointed investors, as higher fuel costs cut into its bottom line, while global giant General Electric Co. (GE) posted results well below even the most pessimistic of forecasts. On a positive note [for a change], E.I. du Pont de Nemours & Co. (DD) issued favorable profit estimates because of the global “Ag Boom.”

On the transactional front, Citigroup Inc. (C) turned to private equity firms as it tries to “unload” some underwater debt, while Washington Mutual Inc. (WM) is set to receive a $7 billion capital infusion from private-equity player TPG Inc. [although WaMu also announced a dividend cut and layoffs]. The Yahoo Inc. (YHOO)/Microsoft Corp. (MSFT) saga continued as the one-time Internet darling looked to partner with rival Google Inc. (GOOG) and Time Warner Inc.’s (TWX) AOL in an attempt to fend off hostile overtures from Bill Gates‘ crew, as well as his new buddy, Rupert Murdoch, through his media giant, News Corp. (NWS).

Initially, investors “generally” digested all the disappointing news [oil/gas prices, airlines, earnings] quite well and seemed somewhat oblivious to the onslaught of negativity. Then again, soaring energy prices are now old news and the poor earnings season had been widely expected. The capital infusions at WaMu and Citi lent more credence to the belief that the credit crisis may be moving into its final throes.

Goldman Sachs Group Inc. (GS) upgraded some financial services companies this week [although Merrill Lynch & Co. Inc. (MER) warned of "the dangers of bottom-fishing"]. By Friday, however, the bad news caught up with investors [thanks to GE] and the markets sold off to end the week. In the meantime, “We’re Flying Better than Ever.” [Sorry, just remembered that the PanAm we all grew up with is out of business].

Weekly Economic Calendar

How quickly they forget? With U.S. Federal Reserve Chairman Ben S. Bernanke actually basking in the glow of some praise for the aggressively creative moves he’s made in an attempt to stave off a major downturn, his central bank predecessor, Alan Greenspan, returned to the limelight last week. And it wasn’t at all pretty. Once deemed the “Maestro” for his monetary-system machinations, Greenspan has emerged as the poster child for “incompetence,” as investors, economists and analysts alike now blame him for everything from the housing crisis to the subprime fiasco to a lax regulatory environment. [Soon the airlines will find a way to blame him, as well. Just watch].

These days, everyone seems to be jumping on the recessionary bandwagon as the International Monetary Fund predicted an even more significant global credit crisis, and the National Bureau of Economic Research claimed that the recession actually began in January. The Fed released minutes from its last policy meeting, in which policymakers warned of a “prolonged and severe business downturn.”

Still, two voting members opposed the decision to cut the Federal Funds rate by three quarters of a percentage point, citing growing inflationary concerns that the rate cut would only exacerbate. On a related note, the Bank of England dropped its benchmark rate to 5% last week, its lowest level in almost a year-and-a-half.

Retailers struggled through a weak March, as same-store-sales activity was reported at its slowest pace in 13 years. An early Easter hampered sales, as consumers were not much in the mood to shop for spring/summer attire when snow was still on the ground. Discounters Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corp. (COST) benefited from the new cost-cutting mindset, while J.C. Penney Co. Inc. (JCP), The Gap Inc. (GPS), and Limited Brands Inc. (LTD) were among those that reported disappointing results.

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