Merrill Lynch chief economist David Rosenberg expects corporate earnings will fall by 20 percent this year, compounding the misery caused by last year's 30 percent fall.

"The market is realizing that this recession is not over this year," Rosenberg told The Financial Post.

"We are staring at a further deterioration in the earnings landscape."

According to Thomson Reuters data, analysts have revised their earnings expectations lower for 22 straight weeks. Consensus estimates for 2009 S&P 500 earnings are down from a high of $88.18 in 2006 to $63.14 per share today.

"The market is looking at a different reality than a plain-vanilla recession and realizing that $70 consensus earnings are not what we are going to see," Rosenberg notes.

"The reality is that markets pay for corporate earnings and we just came off a fourth-quarter net reporting loss for the first time ever," Rosenberg notes.

Even excluding extraordinary losses in the financial sector, earnings for the S&P 500 this year probably declined at least a third from the mid-2007 peak-run rate of $90 a share, says Sosnoff Capital CEO Martin Sosnoff.

“Corporate earnings just fell off the cliff,” Sosnoff writes in Forbes.

As a point of reference, Sosnoff observes that during the Great Depression earnings declined 78 percent from their pre-1929 peak.

“Today, many of our heartland properties like Caterpillar, General Electric and Deere & Co. show comparable shrinkage in their stock prices,” he says.