Facing 2012 Headwinds in Coming Week

NEW YORK (TheStreet) -- Investors won't be able to put off 2012's challenges for very long once the champagne corks are popped and the party hats are thrown away.

The coming week will give us the first hint of whether Wall Street is ready to start anew or whether problems of the past year, namely Europe, will continue to plague the global financial community.

The last trading days of the 2011 offered a period of peace and quiet for traders still in the market. The Dow Jones Industrial Average managed to post a solid 5.6% gain, while the S&P 500 closed the year essentially flat. The Nasdaq Composite finished in the red by 1.7%, although investors weren't expecting a yearly gain there anyway.

The lull is about to end, however. Market watchers may be listing their resolutions, but they're also listing the many headwinds that could restrain growth in the U.S. for 2012. At the top of that list is a negative shock from the eurozone debt crisis.

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Already preempting the new year, the Spanish government said Friday that the country's budget deficit will be worse than expected. As part of Spain's economic plan, the country will be cutting spending, raising taxes, freezing wages -- doing all the things that Greece, Portugal and Italy were forced to do.

The first week of the year may give investors a lucky escape from market-moving surprises. German Chancellor Angela Merkel and French President Nicolas Sarkozy don't meet until Jan. 9, and debt auctions in Italy and Spain aren't scheduled until Jan. 12 to 13.

Perhaps Europe's leaders made some resolutions of their own this time around. Hopes are high for at least the beginning of an end to wasted summit meetings and plans about plans.

"It appears as though the EU would like to resolve anew treaty arrangement in the first quarter," says Marc Pado, market strategist with Cantor Fitzgerald. "With 27 countries with very diverse needs and expectations, this will likely be a battle that is drawn out further than just Q1."