Stocks: Investors hope for a 'Cliff-mas' miracle

  @emilyjanefox December 23, 2012: 12:05 PM ET
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Investors are hoping for a 'cliff-mas' miracle as they head into a holiday-shortened trading week.

Lawmakers in Washington have only one week left to strike a fiscal cliff deal that will avert automatic tax increases and spending cuts due January 1. Many fear that the fiscal cliff could tip the U.S. into another recession.

Investors are on heightened alert over the gridlock in Washington, since politicians struck down their "Plan B" late last week, and debate is halted until after the Christmas holiday.

Anxious investors are also bracing for a low volume trading week. U.S. stock markets will close at 1 p.m. Eastern Time on Monday and be closed entirely on Tuesday, Christmas day.

Related: Fear & Greed Index

The week is also light on economic data. Reports due on the housing market include new and pending home sales and the Case-Shiller 20 city index on home prices.

The housing market has been showing numerous signs of recovery in recent months. Demand for homes have been helped by record low mortgage rates, thanks to the Federal Reserve's decision to buy $40 billion in mortgages every month.

Foreclosures have also fallen to a five-year low, which has cut down the supply of distressed homes available in the market and helped lift home prices.

Aside from housing, investors will get a glimpse into consumer sentiment as holiday shopping wraps up. Last month, optimism about the job market had consumers feeling more upbeat about the U.S. economy than they had been in four and a half years. It's a closely watched gauge, because consumer spending accounts for more than two thirds of U.S. economic activity.

Related: Top fiscal cliff dodgers

All three U.S. stock indexes finished last week higher, even though fiscal cliff fears sent markets tumbling on Friday.

Overall stocks are up significantly in 2012. The Dow Jones Industrial Average has gained 8%, while the S&P 500 and Nasdaq are up 14% and 16% respectively. To top of page

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