Market Overview

The Week Ahead: Fiscal Cliff Deadline Rapidly Approaching

With only two weeks left in 2012, investors will likely be looking to U.S. politicians next week for market moving headlines. So far, House Republicans have failed to reach a deal with the White House that would prevent the country from plunging over the “fiscal cliff” -- a set of legally mandated tax hikes and spending cuts that will go into effect in the new year.

In terms of individual stocks, there won't be many earnings reports, but a few key companies, like Nike (NYSE: NKE) and Research in Motion (NASDAQ: RIMM) will release their results.

Meanwhile, on the economic front, there will be plenty of data, both foreign and domestic.

In the U.S., investors will be keyed in on the state of manufacturing, GDP, personal income, and consumer confidence. Internationally, there will be reports on the rate of inflation in the U.K. and Canada, as well as info on business confidence in Germany.

On the currency front, investors should pay close attention to the USD/JPY pair.

The pair has been rallying in recent sessions, as investors take positions ahead of Japan's election for prime minister.

Shinzo Abe, Japan's Liberal Democratic Party candidate, has called on the Bank of Japan to engage in unlimited quantitative easing. Should Abe win Sunday, the Japanese yen could continue to trade down during the week.

James Chen, FX Solutions' Chief Technical Strategist, told Benzinga the key levels he's watching in the pair.

“We've seen a really strong stair step move,” Chen said, noting the recent action of the yen against the dollar. “Above 84, potentially look at 85.50 as the next resistance level -- April 2011's high.”

However, if Abe should lose the election and the yen should rally, Chen says investors could look to 80.50 as a key support level in the pair.

Thursday should bring the most interesting earnings reports, with both sports apparel giant Nike and handset maker Research in Motion set to report.

Analysts at Credit Suisse are lukewarm on Nike's upcoming earnings report. With a Neutral rating, they aren't anticipating much from the company, particularly with Nike's large exposure to China. Although the Chinese economy showed signs of life last week, there are still concerns that demand remains weak.

Credit Suisse notes, “We expect 2Q results to be held back by persistent China weakness, suggesting limited upside to consensus. Combined with high likelihood of North America futures deceleration, we believe shares will remain range-bound.”

Shares of Nike closed at $96.91 on Friday, down 0.43 percent.

Unlike Nike, RIM had a strong session Friday. Shares closed at $14.04, up 1.30 percent.

Incredibly, over the last three months, shares of RIM are up over 85 percent. If an investor had bought at the late September lows, they could have more than doubled their investment in only a few short weeks.

Much of this rally has likely been fueled by speculation over RIM's upcoming Black Berry 10 mobile operating system. The exact release date for BB10 is not yet known, but investors should look to RIM's earnings release to get further information on the next generation of Blackberry devices.

Analysts at Raymond James view BB10's upcoming release as key for the company, but are not certain how significant it might be.

Raymond James comments, “The ability for RIM to return to meaningful profitability will be an uphill battle...but showing just a modicum of success might be enough to pique the interest of other players to partner or look more strategically at RIM in a world short on smartphone OS, in our opinion.”

As has often been the case in recent weeks, U.S. politicians might once again be the source for much of the market activity. Should politicians come to an agreement to avert the fiscal cliff, markets could move to the upside. On the other hand, signs that an agreement is not forthcoming could lead to further selling pressure.

Key Events

Monday

  • Earnings from: Shuffle Master (NASDAQ: SHFL)
  • Empire Manufacturing (Expected -1); Net Long-term TIC Flows (Expected $25B)

Tuesday

  • Earnings from: Jefferies (NYSE: JEF), Oracle (NASDAQ: ORCL)
  • Current Account Balance (Expected -$103.4B); UK PPI Input MoM (Expected -0.1 percent); UK CPI MoM (Expected 0.2 percent)

Wednesday

  • Earnings from: FedEx (NYSE: FDX), General Mills (NYSE: GIS), Navistar (NYSE: NAV), Jabil Circuit (NYSE: JBL)
  • Housing Starts (Expected 894K); MBA Mortgage Applications; Building Permits (Expected 875k); German Ifo Business Climate Index (Expected 102); New Zealand GDP (Expected 0.4 percent)

Thursday

  • Earnings from: Carnival (NYSE: CCL), ConAgra (NYSE: CAG), Darden Restaurants (NYSE: DRI), Discover Financial (NYSE: DFS), KB Home (NYSE: KBH), Rite Aid (NYSE: RAD), Nike (NYSE: NKE), Red Hat (NYSE: RHT), Research in Motion (NASDAQ: RIMM)
  • GDP QoQ (Expected 2.8 percent); Personal Consumption (Expected 1.4 percent); Initial Jobless Claims (Expected 360k); Continuing Claims (Expected 3200k); UK Retail Sales MoM (Expected 0.3 percent); Canadian Core Retail Sales MoM

Friday

  • Shaw Group (NYSE: SHAW), Walgreens (NYSE: WAG)
  • Personal Income (Expected 0.3 percent); Personal Spending (Expected 0.4 percent); Durable Goods Orders (Expected 0.5 percent); University of Michigan Consumer Confidence (Expected 75); UK GDP QoQ (Expected 1 percent); Canadian Core CPI

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