NEW YORK ( TheStreet) -- Sick of hearing about the fiscal cliff yet? Hope not because the noise isn't about to stop anytime soon.

Like the whole debt ceiling debacle, most analysts don't expect the federal government to actually go over the cliff, a term that refers to the combination of expiring tax cuts and spending reductions set to go into effect in 2013. But again like the debt ceiling debacle, there's the potential for a lot of posturing and angst that could very well bring America much closer to the edge of the cliff than anyone is comfortable with.

And let's not forget, sometimes the unexpected comes to pass; often with disastrous consequences. On Thursday, the Congressional Budget Office, a nonpartisan group, offered up this unpleasant scenario, basically saying that going over the cliff would push the U.S. economy into recession.

"According to CBO's projections, if all of that fiscal tightening occurs, real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013 (as measured by the change from the fourth quarter of 2012 to the fourth quarter of 2013)--reflecting a decline in the first half of the year and renewed growth at a modest pace later in the year," the CBO's report said. "That contraction of the economy will cause employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013."

That's scary stuff and investors sitting on healthy gains in 2012's equity winners have to be thinking about taking some profits off the table now (if they haven't already), especially since the election's results didn't really provide any sort of referendum.

Capital Economics gave its take on Wednesday, saying it doesn't expect the elections to have a "lasting impact" on the stock market but also acknowledging that the cliff problem will be difficult to navigate.

"Neither the tax hikes on investment income proposed by President Obama nor the tax cuts proposed by his defeated Republican challenger are likely to see the light of day, as Congress remains split," said John Higgins, senior markets economist at the firm. "But a compromise between the Democrats and Republicans to avert next year's fiscal 'cliff' may not be reached until the eleventh hour, which could affect sentiment in the meantime."

Higgins offered up two reasons though why going over the cliff mights not be the end of the world for equities.

"Of course, if the Democrats and Republicans fail to reach the sort of compromise that we foresee, then there could indeed be a major and lasting reaction in the stock market," he said. "But even under this scenario, the impact on the stock market might not be that dramatic for two reasons. First, not all investors pay the top rates of tax that Obama wants to see rise. And second, a growing share of US equities is sheltered from tax."

As for Friday's scheduled news, J.C. Penney ( JCP) is slated to report its third-quarter results before the opening bell.

The department store operator, which is in the midst of a rocky turnaround effort under the leadership of former Apple exec Rob Johnson, is anticipated to post a loss of 7 cents a share on revenue of $3.27 billion. In the same period a year earlier, J.C. Penney earned 11 cents a share on revenue of $3.99 billion.

Since coming on board roughly a year ago, Johnson has sought to revamp the J.C. Penney brand, emphasizing low regular prices (no discounts) and a heightened fashion sense but the results so far have been a borderline disaster, as evidenced by a 21.7% drop in same-store sales in the second quarter.

The stock fell sharply on Thursday ahead of the numbers, losing 5% to close at $21.69. At that level, it's down 50% since hitting a 52-week high of $43.18 on Feb. 19. The majority of the sell side is bearish with 15 of the 21 analysts covering the shares at either hold (12) or underperform (3), and the median 12-month price target sitting at $25.

Check out TheStreet's quote page for J.C. Penney for year-to-date share performance, analyst ratings, earnings estimates and much more.

Other companies reporting quarterly results on Friday include CompuCredit ( CCRT), E.W. Scripps ( SSP), Energizer Holdings ( ENR), Federal Signal ( FSS), Foster Wheeler ( FWLT), Ivanhoe Energy ( IVAN), MGIC Investment ( MGIC), NutriSystem ( NTRI), and Warner Chilcott ( WCRX).

Also on the corporate front, the pullback in Apple ( AAPL) becomes a bigger topic for the broad market with every passing day's decline. The shares closed Thursday at $537.65, down 3.6% as it fell for a fifth straight session. Since hitting an all-time high of $705.07 on Sept. 21, Apple has lost nearly 24%.

Oppenheimer was out in support of the stock, suggesting investors buy Apple on the recent weakness.

"We see good potential for a near-term rebound to ~$620 before experiencing resistance," the firm said. "At this point the shares embed concerns around (1) the poor macro environment and weak consumer spending with regards to iPhone demand, (2) iPad mini pricing and tablet share losses, (3) management changes, and (4) margin compression. Not ignoring these challenges, we still believe the shares are overextended to the downside and embed too much pessimism regarding headwinds and execution."

Friday's economic calendar includes export and import prices for October at 8:30 a.m. ET; the initial University of Michigan consumer sentiment reading for November at 9:55 a.m. ET; and wholesale inventories for September at 10 a.m. ET.

And finally, shares of Walt Disney ( DIS) were down more than 2% in after-hours action after the media giant posted an in-line profit but came up short on the top line.

Also, Groupon ( GRPN) was getting walloped, dropping nearly 16% after the online deals company reported a surprise loss for its third quarter with revenue of $568.6 million missed Wall Street's consensus view of $590.1 million.

The big surprise late Thursday though was ( PCLN) pulling off a surprise deal to acquire Kayak Software ( KYAK) for $1.8 billion in cash and stock, valuing the shares at $40 each.

-- 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.

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