In a stark illustration of the weakness in consumer spending, J.C. Penney has cut its forecasts for the first quarter, saying that sales through Easter were "well below expectations."

The company says it now expects to report earnings of 50 cents per share, below last month's forecast of 70 cents to 80 cents per share.

The bleak outlook will heighten fears that the economy is in a recession and that consumers are cutting back their spending as a result despite a $186 billion government stimulus package.

"Consumer confidence is at a multi-year low," said Myron Ullman, III, Penney's chief executive. "J.C. Penney counts half of American families as its customers, and they are feeling macro-economic pressures from many areas, including higher energy costs, deteriorating employment trends, and significant issues in the housing and credit markets."