It's a short week on Wall Street,, but that doesn't mean that it won't be one full of action. On Monday, markets will close at 1:00 p.m. ET and won't reopen until Wednesday, when the focus turns to getting the fiscal cliff resolved (full coverage of the fiscal cliff found here). Until now, markets have mostly glossed over the impasse in Washington and have actually focused on the positive when one side or the other seems to budge closer to a deal. Even after "Plan B" failed last week, the Dow Jones Industrial Average (^DJI -0.39%) and S&P 500 (^GSPC -0.24%) edged 0.4% and 1.2% higher, respectively.

The economic news will be quiet this week until jobless claims, consumer confidence, and new home sales numbers come out on Thursday. Investors will be watching for signs that consumers and businesses are pulling back as we head toward the fiscal cliff.

Two things I'll be watching this week are the reaction by banking and infrastructure stocks and a potential sell-off for profit-taking before taxes go up. Banks such as Bank of America (BAC -0.31%) and JPMorgan Chase (JPM -0.57%) have a vested interest in seeing a fiscal cliff deal get done, because a recession next year could turn back the progress they've made since the last recession. Companies such as Alcoa (AA) and Caterpillar (CAT -0.33%) are hoping that a recession doesn't hit and turn off the little bit of momentum the global economy has built. China has been the one consistent growth engine over the past few years, and with Europe still struggling, these companies need the U.S. to maintain any bit of growth it can.

It will also be interesting to see if we have a sell-off of the markets heading into the first of the year. Investors haven't been selling so far in December, but taxes are going up in January whether there's a fiscal cliff deal or not, so it may be time to look at cashing in some winning stocks this year. Bank of America, for example, has doubled over the past year, and if you're sitting on gains, it might be a prudent time to cash some of them in at a lower tax rate. 

Investing in the New Year
As we head into the New Year, it's time to consider what the hot stocks for 2013 will be.