What to Watch For This Week -- Besides the Fiscal Cliff

The fiscal cliff will dominate sentiment in this shortened trading week, but that's not all investors should be paying attention to. Short term, the Dow Jones Industrial Average and S&P 500 will gyrate based on the mood in Washington, but business will continue to function and economic data will tell us whether conditions are getting better or worse.

The ISM Index, a gauge of manufacturing activity, is due out on Wednesday, and economists expect a reading of 50.5, above the 49.5 reading last month. A reading above 50 indicates that manufacturing is expanding in the U.S., so a decent reading from December would be a good sign.

Employment numbers are also expected to show mild improvement. ADP reports its data on Thursday, where estimates are for a 149,000 jump in employment over last month. On Friday, the Labor Department is expected to report that nonfarm payrolls increased 153,000 in December and the unemployment rate held steady at 7.7%.

Investors should watch a few stocks this week as the market reacts to the fiscal cliff and economic data. Alcoa and Bank of America have been two of the biggest movers when macro events happen, and this week shouldn't be any different. Look particularly close to the reaction if negative news comes out. Any signs that we're heading back toward a recession with a nudge from the fiscal cliff could send these stocks tumbling.

If negotiations go awry over the next few days, Foolish investors should look at it as a great buying opportunity. The fiscal cliff is a big deal, but it won't stop the economy from going forward. An overreaction by the markets will be a great buying opportunity, so I'm ready to hit the buy button this week.

A stock for the New Year
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

The article What to Watch For This Week -- Besides the Fiscal Cliff originally appeared on Fool.com.

Fool contributor Travis Hoium has no positions in the stocks mentioned above. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.