By Ben Fox Rubin
As 2013 rings in, the fiscal cliff will again be the primary
focus of the financial world next week, as investors wait to see if
lawmakers reach a deal to lessen the impact of tax increases and
spending cuts set to take affect in the new year.
After a particularly slow week for quarterly results and data
reports, both will pick up next week, with critical December retail
same-store sales numbers, the monthly jobless rate and a handful of
quarterly earnings reports scheduled.
Stocks Showing Pain from Fiscal Cliff Talks
After markets remained relatively upbeat in past weeks, stocks
have been barrelling downward for what should be a fifth straight
days as negotiations on avoiding the fiscal cliff have stalled.
Amid growing pessimism over the chances of a last-minute deal,
Congressional leaders and the White House were preparing to meet
Friday afternoon and the House of Representatives is set to
reconvene Sunday evening.
For months, economists have warned that the fiscal cliff, a mix
of $500 billion in tax increases and spending cuts set to take
effect Jan. 1, could clobber the country's fragile economic
recovery and force it back into recession.
Any resolution would likely be a scaled-back version of the
package President Barack Obama and Congressional leaders expected
to pass after the November election.
Mosaic, Family Dollar, Sonic
Fertilizer producer Mosaic Co. (MOS) is expected to post sharply
lower fiscal second-quarter earnings Friday, after it cut its
potash and phosphates sales volume expectations last month,
pointing to weak demand.
Still, the company said it believes that customer demand is
simply delayed, adding that the long-term prospects for
crop-nutrient remains positive. To that end, analysts polled by
Thomson Reuters do see a sizeable improvement in earnings for its
fiscal third quarter, which ends February.
Meanwhile, Family Dollar Stores Inc. (FDO) on Thursday should
provide more information into early shopping patterns during the
holiday season. The discount retailer is expected to record higher
first-quarter earnings for the period, which ended November.
Additional companies set to report next week are restaurant
operator Sonic Corp. (SONC), athletic retailer Finish Line Inc.
(FINL) and egg producer Cal-Maine Foods Inc. (CALM).
No initial public offerings are expected to start trading next
week, according to IPO Boutique's website.
December Jobs Report, Factory Data Next Week
The December jobs report, scheduled for Friday, is expected to
show almost no pick-up in hiring, according to economists surveyed
by Dow Jones Newswires. The median forecast expects nonfarm
payrolls increased by 150,000 this month, little different from the
146,000 new jobs created in November.
The December jobless rate, which may reflect some lingering
impacts from Hurricane Sandy, is forecast to rise to 7.8% after the
rate unexpectedly dropped to a near four-year low of 7.7% in
November. Still, much of that decline reflected jobseekers dropping
out of the labor force rather than more workers finding
employment.
Next week will also see release of the widely watched business
surveys conducted by the Institute for Supply Management, as well
as December same-store sales data from several retailers and
monthly car-sales figures.
Jobs Outlook Could Jolt Treasury Market
Looking further down the road, should the unemployment rate
continue to decrease in the months ahead, Treasury bonds would
likely lose their luster as investors' sentiment toward the U.S.
growth outlook brightens.
Perhaps more importantly, a stronger labor market and
potentially firmer economy would also have investors starting to
speculate that the Federal Reserve may reverse its ultra-easy
monetary policy earlier than expected in mid-2015, traders and
analysts said.
Such a reversal in policy could take months to transpire, but a
change in expectations from investors would move markets well
before the Fed moved itself.
--Kathleen Madigan and Min Zeng contributed to this article.
Write to Ben Fox Rubin at ben.rubin@dowjones.com.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires