This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Market Preview: Crossing the Canyon

Stocks in this article: ZNGA ZUMZ FB SPY ^GSPC ^DJI ^IXIC

NEW YORK ( TheStreet) -- There's likely weeks of posturing in between now and then but most market watchers are expecting the politicians will be able to hammer out a budget compromise and avoid the fiscal cliff.

Deutsche Bank, for one, is recasting the cliff as a canyon and the firm outlined its scenario for a strong run for the S&P 500 in 2013 in research on Thursday.

"Given the election results -- which raised the risk of higher taxes, especially on dividends -- we consider the S&P 500 at 1400 fair until clarity emerges on new legislation that mitigates the fiscal cliff," said analyst David Bianco Thursday in a note to clients. "If this legislation reduces 2013 fiscal drag to 1.5% or less and the top tax rate hikes from what is scheduled, then the S&P 500 should rally to 1500 in early 2013 and put 1600 well within reach for 2013 end. Thus, we see 2012's year-end fiscal cliff as being more of a canyon with attractive S&P returns on the other side."

Depending on the Republicans and Democrats to get on the same page is a recipe for choppy trading but Bianco is confident they'll eventually see the light.

"It is distressing that building a bridge over this canyon is in the hands of politicians, but the means (deficit is falling) to find compromise exist and eventually so too the will," he said. "For the holiday season, we find the reward/risk on the overall S&P 500 attractive and compelling at Tech and Industrials."

Deutsche Bank's 12-month target for the S&P 500 is 1500, a level that would be an easy hurdle with only "modest" expansion of the index's valuation.

"We think modest PE expansion to 14-15 trailing EPS can be driven by: 1) EPS proving resilient with ~5% EPS growth in 2013, 2) continued buybacks and share count shrinkage, 3) further ramp-up in acquisitions with corporate re-leveraging. PE expansion to 15 or higher is possible, but it will likely require pro growth US tax policy," Bianco said.

As for Friday's scheduled news, it's a light day with the earnings calendar featuring Genesco (GCO), Johnson Outdoors (JOUT), and United Natural Foods (UNFI).

The economic calendar includes personal income, spending and the core PCE personal consumption expenditure inflation data for October at 8:30 a.m. ET; as well as the Chicago purchasing managers index for November at 9:45 a.m. ET.

Thursday's after-hours movers included Zynga (ZNGA), which fell more than 12% after the company and Facebook (FB) modified the terms of their partnership; and Zumiez (ZUMZ), which tumbled after giving a disappointing outlook.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs