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After fiscal deal, markets settle into new reality

Traders work on the floor of the New York Stock Exchange on January 2, 2013 in New York City.

This is the first full week of trading on Wall Street since Congress hammered out a fiscal cliff compromise. Lawmakers this morning are staking out their positions for the next round of the budget battle. The White House says it will not negotiate over the debt ceiling; Republicans say any further tax hikes are off the table.

Immediately following the fiscal agreement, U.S. stocks had their best week in more than a year last week. But will the optimism last?

"I think we are starting to see reality settle in this morning," says Julia Coronado, chief economist at BNP Paribas. She believes the markets are likely to start feeling the impact of the payroll tax hike as soon as this week.

Anaylsts are expecting a mixed bag, as they look ahead to the start of earnings season tomorrow. For her part, Coronado says she's focused less on earnings past, and more on the corporate outlook.

"I'm going to be focused on what is the guidance for the year ahead, particularly given the fiscal deal -- how are companies thinking about 2013? Are they optimistic or pessimistic?" she says.

About the author

Jeff Horwich is the interim host of Marketplace Morning Report and a sometime-Marketplace reporter.

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