Market Preview: Beyond the Cliff

Tickers in this article: SPY ^DJI GMCR AEO ^GSPC ^IXIC GRPN

NEW YORK ( TheStreet) -- The direction of stocks may continue to be held hostage to the fiscal cliff for the immediate future but that's not stopping some folks from sticking to their bullishness about 2013.

Canaccord Genuity equity strategist Tony Dwyer backed a target of 1650 for the S&P 500 for next year on Tuesday. That view would represent nearly 18% appreciation from Tuesday's close at 1399 as well as a new all-time high.

"History, global monetary policy, and the fundamental sweet spot of U.S. economic data argue strongly for better performance as we move through the end of Q4/12 and into next year," said Dwyer. "We remain optimistic due to further evidence of sustainable improvement in (1) consumer sentiment, (2) employment, (3) credit availability and (4) housing."

Dwyer said the firm's overweight sectors are still consumer discretionary, information technology, financials and "to a lesser degree Industrials" and stressed looking at the big picture on earnings, noting that third-quarter results didn't turn out as badly as feared.

"Clearly, the top line for 3Q12 was weak, but the quarterly reports ended better than expectations going into the reporting season," he said in Tuesday's research report. "The current consensus view for 4Q12 and 2013 SPX operating EPS calls for reacceleration."

As for Wednesday's scheduled news, American Eagle Outfitters (AEO) is slated to report its third-quarter results before the opening bell, and the average estimate of analysts polled by Thomson Reuters is for a profit of 39 cents a share in the October-ended period on revenue of $873.3 million.

Shares of the Pittsburgh-based teen apparel and accessories retailer are up more than 45% in the past year, though the stock has pulled back nearly 20% since hitting a 52-week high of $23.94 on Sept. 19. At current levels, the valuation is still reasonable with the forward price-to-earnings multiple at 12.5X and the forward annual dividend yield at 2.2%.

The sell side is fairly bullish with 15 of the 25 analysts covering the stock at either strong buy (11) or buy (4) and the 12-month median price target $25.75, implying potential upside of nearly 33% from Tuesday's close at $19.39.

Count Sterne Agee among the bulls on American Eagle. The firm, which has a buy rating on the stock with a $27 price target, is expecting in-line results for the quarter and it believes the company did well over the first big shopping weekend of gift-giving season.

"Our holiday checks this weekend suggested AEO sales were off to a good start with promotional levels similar to last year," the firm said. "Under new management the Company has significant top- and bottom-line drivers with inventory management a key focus."

Sterne Agee said it's expecting American Eagle to provide a forecast for earnings of 55 cents a share for its fiscal fourth quarter ending in January, a view that's in line with the current consensus.

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