Wall Street Week Ahead: Bears hibernate as stocks near record highs

NEW YORK (Reuters) - Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. The bearish case is a difficult one to make right now.

Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again.

The Standard & Poor's 500 Index <.spx> has gained 5.4 percent this year and closed above 1,500 - climbing to the spot where Wall Street strategists expected it to be by mid-year. The Dow Jones industrial average <.dji> is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895.98, its highest close since October 31, 2007.

The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. On Friday, the benchmark S&P 500 ended at 1,502.96 - its first close above 1,500 in more than five years.

"Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years."

The most recent Reuters poll of Wall Street strategists estimated the benchmark index would rise to 1,550 by year-end, a target that is 3.1 percent away from current levels. That would put the S&P 500 a stone's throw from the index's all-time intraday high of 1,576.09 reached on October 11, 2007.

The new year has brought a sharp increase in flows into U.S. equity mutual funds, and that has helped stocks rack up four straight weeks of gains, with strength in big- and small-caps alike.

That's not to say there aren't concerns. Economic growth has been steady, but not as strong as many had hoped. The household unemployment rate remains high at 7.8 percent. And more than 75 percent of the stocks in the S&P 500 are above their 26-week highs, suggesting the buying has come too far, too fast.

MUTUAL FUND INVESTORS COME BACK

All 10 S&P 500 industry sectors are higher in 2013, in part because of new money flowing into equity funds. Investors in U.S.-based funds committed $3.66 billion to stock mutual funds in the latest week, the third straight week of big gains for the funds, data from Thomson Reuters' Lipper service showed on Thursday.

Energy shares <.5sp10> lead the way with a gain of 6.6 percent, followed by industrials <.5sp20>, up 6.3 percent. Telecom <.5sp50>, a defensive play that underperforms in periods of growth, is the weakest sector - up 0.1 percent for the year.

More than 350 stocks hit new highs on Friday alone on the New York Stock Exchange. The Dow Jones Transportation Average <.djt> recently climbed to an all-time high, with stocks in this sector and other economic bellwethers posting strong gains almost daily.

"If you peel back the onion a little bit, you start to look at companies like Precision Castparts , Honeywell , 3M Co and Illinois Tool Works - these are big, broad-based industrial companies in the U.S. and they are all hitting new highs, and doing very well. That is the real story," said Mike Binger, portfolio manager at Gradient Investments, in Shoreview, Minnesota.

The gains have run across asset sizes as well. The S&P small-cap index <.spcy> has jumped 6.7 percent and the S&P mid-cap index <.mid> has shot up 7.5 percent so far this year.

Exchange-traded funds have seen year-to-date inflows of $15.6 billion, with fairly even flows across the small-, mid- and large-cap categories, according to Nicholas Colas, chief market strategist at the ConvergEx Group, in New York.

"Investors aren't really differentiating among asset sizes. They just want broad equity exposure," Colas said.

The market has shown resilience to weak news. On Thursday, the S&P 500 held steady despite a 12 percent slide in shares of Apple after the iPhone and iPad maker's results. The tech giant is heavily weighted in both the S&P 500 and Nasdaq 100 <.ndx> and in the past, its drop has suffocated stocks' broader gains.

JOBS DATA MAY TEST THE RALLY

In the last few days, the ratio of stocks hitting new highs versus those hitting new lows on a daily basis has started to diminish - a potential sign that the rally is narrowing to fewer names - and could be running out of gas.

Investors have also cited sentiment surveys that indicate high levels of bullishness among newsletter writers, a contrarian indicator, and momentum indicators are starting to also suggest the rally has perhaps come too far.

The market's resilience could be tested next week with Friday's release of the January non-farm payrolls report. About 155,000 jobs are seen being added in the month and the unemployment rate is expected to hold steady at 7.8 percent.

"Staying over 1,500 sends up a flag of profit taking," said Jerry Harris, president of asset management at Sterne Agee, in Birmingham, Alabama. "Since recent jobless claims have made us optimistic on payrolls, if that doesn't come through, it will be a real risk to the rally."

A number of marquee names will report earnings next week, including bellwether companies such as Caterpillar Inc , Amazon.com Inc , Ford Motor Co and Pfizer Inc .

On a historic basis, valuations remain relatively low - the S&P 500's current price-to-earnings ratio sits at 15.66, which is just a tad above the historic level of 15.

Worries about the U.S. stock market's recent strength do not mean the market is in a bubble. Investors clearly don't feel that way at the moment.

"We're seeing more interest in equities overall, and a lot of flows from bonds into stocks," said Paul Zemsky, who helps oversee $445 billion as the New York-based head of asset allocation at ING Investment Management. "We've been increasing our exposure to risky assets."

For the week, the Dow climbed 1.8 percent, the S&P 500 rose 1.1 percent and the Nasdaq advanced 0.5 percent.

(Reporting by Ryan Vlastelica; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Azarenka beats Li, defends Australian Open title

MELBOURNE, Australia (AP) — Victoria Azarenka had the bulk of the crowd against her. The fireworks were fizzling out, and when she looked over the net she saw Li Na crashing to the court and almost knocking herself out.

Considering the cascading criticism she'd encountered after her previous win, Azarenka didn't need the focus of the Australian Open final to be on another medical timeout.

So after defending her title with a 4-6, 6-4, 6-3 victory over the sixth-seeded Li in one of the most unusual finals ever at Melbourne Park, Azarenka understandably dropped her racket and cried tears of relief late Saturday night.

She heaved as she sobbed into a towel beside the court, before regaining her composure to collect the trophy.

"It isn't easy, that's for sure, but I knew what I had to do," the 23-year-old Belarusian said. "I had to stay calm. I had to stay positive. I just had to deal with the things that came onto me."

There were a lot of those things squeezed into the 2-hour, 40-minute match. Li, who was playing her second Australian Open final in three years, twisted her ankle and tumbled to the court in the second and third sets.

The second time was on the point immediately after a 10-minute delay for the Australia Day fireworks — a familiar fixture in downtown Melbourne on Jan. 26, but not usually coinciding with a final.

Li had been sitting in her chair during the break, while Azarenka jogged and swung her racket around before leaving the court to rub some liniment into her legs to keep warm.

The 30-year-old Chinese player had tumbled to the court after twisting her left ankle and had it taped after falling in the fifth game of the second set. Immediately after the fireworks ceased, and with smoke still in the air, she twisted the ankle again, fell and hit the back of her head on the hard court.

The 2011 French Open champion was treated immediately by a tournament doctor and assessed for a concussion in another medical timeout before resuming the match.

"I think I was a little bit worried when I was falling," Li said, in her humorous, self-deprecating fashion. "Because two seconds I couldn't really see anything. It was totally black.

"So when the physio come, she was like, 'Focus on my finger.' I was laughing. I was thinking, 'This is tennis court, not like hospital.'"

Li's injury was obvious and attracted even more support for her from the 15,000-strong crowd.

Azarenka had generated some bad PR by taking a medical timeout after wasting five match points on her own serve in her semifinal win over American teenager Sloane Stephens on Thursday. She came back after the break and finished off Stephens in the next game, later telling an on-court interviewer that she "almost did the choke of the year."

She was accused of gamesmanship and manipulating the rules to get time to regain her composure against Stephens, but defended herself by saying she actually was having difficulty breathing because of a rib injury that needed to be fixed.

That explanation didn't convince everybody. So when she walked onto Rod Laver Arena on Saturday, there were some people who booed, and others who heckled her or mimicked the distinctive hooting sound she makes when she hits the ball.

"Unfortunately, you have to go through some rough patches to achieve great things," she said. "That's what makes it so special for me. I went through that, and I'm still able to kiss that beautiful trophy."

She didn't hold a grudge.

"I was expecting way worse, to be honest. What can you do? You just have to go out there and try to play tennis in the end of the day," she said. "It's a tennis match, tennis battle, final of the Australian Open. I was there to play that.

"The things what happened in the past, I did the best thing I could to explain, and it was left behind me already."

The match contained plenty of nervy moments and tension, and 16 service breaks — nine for Li. But it also produced plenty of winners and bravery on big points.

Azarenka will retain the No. 1 ranking she's mostly held since her first Grand Slam win in Melbourne last year.

Li moved into the top five and is heartened by a recent trend of Australian runner-ups winning the French Open. She accomplished that in 2011, as did Ana Ivanovic (2008) and Maria Sharapova (2012).

"I wish I can do the same this year, as well," Li said.

Later Saturday, Bob and Mike Bryan won their record 13th Grand Slam men's doubles title, defeating the Dutch team of Robin Haase and Igor Sijsling 6-3, 6-4.

Sunday's men's final features two-time defending champion Novak Djokovic and U.S. Open winner Andy Murray. Djokovic is seeking to become the first man in the Open era to win three titles in a row in Australia.

Azarenka was planning a night of partying to celebrate her second major title, with her friend Redfoo and the Party Rock crew, and was hopeful of scoring some tickets to the men's final.

She said she needed to let her hair down after a draining two weeks and hoped that by being more open and frank in recent times she was clearing up any misconceptions the public had of her.

"When I came first on the tour I kind of was lost a little bit," he said. "I didn't know how to open up my personality. It's very difficult when you're alone. I was independent since I was, you know, 10 years old. It was a little bit scary and I wouldn't show my personality.

"So the (last) couple of years I learned how to open up to people and to share the moments. I wasn't really good before. I hope I got better. It's your judgment."

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Analysis: Obama climate push to benefit energy efficiency firms

LOS ANGELES (Reuters) – President Barack Obama‘s promise to attack climate change is likely to light a fire under federal agencies slow to comply with a mandate to cut energy use – which could be very good news for companies that specialize in systems that save power.

Waiting in the wings are the likes of Honeywell International Inc, Johnson Controls Inc and Ameresco Inc that are ready to carry out heating and cooling system upgrades, lighting retrofits and similar projects in some of the government’s 500,000 buildings.

Efficiency projects, according to many, are a key way the government can reduce its own energy consumption and greenhouse gas emissions without seeking additional funds from Congress.

Many of these projects are implemented under so-called energy savings performance contracts in which a company develops, installs and arranges financing for improvements to boost energy efficiency and lower costs. The energy service company guarantees the project’s energy savings and services are repaid through those savings.

In late 2009, Obama mandated that federal agencies make significant reductions in energy consumption. The aim was for the government to “lead by example” by upgrading many of its facilities. Two years later, the administration tried to jumpstart that work by setting a goal for federal agencies to enter into at least $ 2 billion of energy efficiency projects within two years.

“There is a lot more potential in the program than what’s been done today,” said Adam Procell, executive vice president at Lime Energy Co, which works with larger companies such as Johnson Controls to design and install energy efficiency projects for federal customers.

With Obama renewing his commitment to combat climate change in his second inaugural address this week, some expect to see more pressure on agencies to get going on those projects.

“If President Obama was to let all of his administrators know that this was an important priority of his, you could see reacceleration of this market in a relatively short period of time,” said Wedbush Securities analyst Craig Irwin, who follows energy efficiency companies.

$ 2 BILLION GOAL

With less than a year left to reach the $ 2 billion goal, major efficiency companies have been working to develop project proposals and expect a string of contracts to be awarded this year.

“In the last six months, federal government activity has heated up,” Paul Orzeske, president of Honeywell Building Solutions, said in an interview. “That’s going to step up as the year goes on.”

In October, Honeywell won an $ 80.6 million project to improve energy efficiency at Tinker Air Force Base in Oklahoma, the largest such project ever awarded by the federal government, according to Orzeske. Most such projects are in the $ 10 million to $ 15 million range, he added.

The upgrades are expected to save more than $ 170 million over 20 years, guaranteed by Honeywell through the contract.

Other energy service companies poised to benefit from federal project awards include Ameresco and United Technologies Corp’s Noresco unit, both of which have been active in the federal market in recent years. Other companies that have done federal projects in the past include Clark Energy Group LLC, Siemens AG and Schneider Electric SA.

The U.S. market for energy efficiency and services topped $ 5.1 billion in 2011, according to Pike Research, and is expected to reach $ 16 billion in sales by 2020. The market is dominated by municipal, university, school and hospital projects, but demand from federal agencies has increased because of the Obama administration’s mandate and economic stimulus programs, the report said.

Johnson Controls Building Efficiency’s vice president of government relations, Mark Wagner, said the government has not yet addressed what will happen once it meets its $ 2 billion goal, but he was encouraged by Obama’s renewed pledge to address climate change.

“The budget is going to be tight in the federal government for the foreseeable future,” Wagner said. “If government agencies want to make their facilities more efficient, performance contracting is the way to address their needs and to address climate change.”

Johnson Controls won a $ 16 million contract in late 2011 to put in a solar energy installation and make other efficiency improvements at Fort Bliss, the nation’s largest military installation.

Smaller companies that supply equipment or software to the project developers could also see a boost from federal projects, according to Aditya Ranade, who leads the sustainable building materials team at technology research firm Lux Research.

Specifically, Ranade called out LED and lighting systems companies Acuity Brands Inc and Digital Lumens and Optimum Energy LLC, which uses software and cloud computing to optimize heating, ventilation and air conditioning systems, as companies that could see a boost in orders from federal contracts.

Acuity Brands’ stock is already up 2.4 percent since Obama’s speech on Monday and Ameresco’s shares have gained about 3 percent.

(Reporting by Nichola Groom.; Additional reporting by Tej Sapru in Bangalore; Editing by Patricia Kranz)

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Can sanctions deter North Korea?

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

Kim Jong Un and his military

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STORY HIGHLIGHTS

• N. Korea said Thursday it plans to carry out new nuclear test and more long-range rocket launches


• It said they are part of new phase of confrontation with United States


• George A. Lopez says North Korea's aim is to be recognized as a 'new nuclear nation by fait accompli'


• The Security Council sanctions aim to deteriorate and disrupt N. Korea's programs, says Lopez

Editor's note: George A. Lopez holds the Hesburgh Chair in Peace Studies at the Kroc Institute, University of Notre Dame. He is a former member, UN Panel of Experts on DPRK.

Indiana, U.S. (CNN) -- North Korea has responded to new Security Council sanctions condemning its December 12 rocket launch with a declaration that it plans a third nuclear test and more missile launches. Politically, it has made unambiguous that its "aim" is its enemy, the United States.

In this rapid reaction to U.N. sanctions, the young government of Kim Jong Un underscores what Security Council members have long known anticipated from the DPRK. Their end-game is to create a vibrant, integrated missile and nuclear weapons program that will result - as in the cases of Pakistan and India - in their being recognized as a new nuclear nation by fait accompli.

Read more: North Korea says new nuclear test will be part of fight against U.S.

In light of DPRK defiance - and a soon to occur nuclear test - the Security Council's first set of sanctions on North Korea since 2009 may seem absurd and irrelevant. These sanctions will certainly not prevent a new DPRK nuclear test. Rather, the new sanctions resolution mobilizes regional neighbors and global actors to enforce sanctions that can weaken future DPRK programs and actions.

Read more: U.N. Security Council slams North Korea, expands sanctions

The utility, if not the necessity, of these Security Council sanctions are to deteriorate and disrupt the networks that sustain North Korea's programs. Chances of this degradation of DPRK capabilities have increased as the new sanctions both embolden and empower the member states who regularly observe - but do nothing about - suspicious vessels in their adjacent waterways.

The resolution provides new guidance to states regarding ship interdiction, cargo inspections, and the seizure and disposal of prohibited materials. Regarding nuclear and missile development the sanctions expand the list of material banned for trade to DPRK, including high tech, dual-use goods which might aid missile industries.

Read more: South Korean officials: North Korean rocket could hit U.S. mainland

These new measures provide a better structure for more effective sanctions, by naming new entities, such as a bank and trading companies, as well as individuals involved in the illicit financing of prohibited materials, to the sanctions list. To the surprise of many in the diplomatic community - the Council authorizes states to expose and confiscate North Korea's rather mobile "bulk cash." Such currency stocks have been used in many regions to facilitate purchases of luxury goods and other banned items that sustain the DPRK elites.

Finally, the Security Council frees the Sanctions Committee to act more independently and in a timely manner to add entities to the list of sanctioned actors when evidence shows them to be sanctions violators. This is an extensive hunting license for states in the region that can multiply the costs of sanctions to the DPRK over time.

Read more: North Korea's rocket launches cost $1.3 billion

Whatever their initial limitations, the new round of U.N. sanctions serve as a springboard to more robust measures by various regional and global powers which may lead back to serious negotiations with DPRK.

Despite its bluster and short-term action plan, Pyongyang recognizes that the wide space of operation for its policies it assumed it had a week ago, is now closed considerably. To get this kind of slap-down via this Security Council resolution - when the launch was a month ago - predicts that any nuke test or missile launch from Pyongyang will bring a new round of stronger and more targeted sanctions.

Read more: North Korea silences doubters, raises fears with rocket launch

Although dangerous - a new game is on regarding DPRK. Tougher U.N. measures imposed on the North generated a predictable response and likely new, prohibited action. While DPRK may be enraged, these sanctions have the P5 nations, most notably China, newly engaged. A forthcoming test or launch will no doubt increase tensions on both sides.

But this may be precisely the shock needed to restart the Six Party Talks. Without this institutional framework there is little chance of influencing DPRK actions. And in the meantime, the chances of greater degrading of DPRK capabilities via sanctions, are a sensible next best action.

Read more: Huge crowds gather in North Korean capital to celebrate rocket launch

The opinions expressed in this commentary are solely those of George A. Lopez.

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Ice storm on horizon for Sunday

As icicles hang from Cloud Gate, Jay Ing of Chicago walks through Millennium Park in Chicago last February. (Scott Strazzante, Chicago Tribune / January 26, 2013)

Staff report

10:26 a.m. CST, January 26, 2013

The National Weather Service has issued a winter storm watch for northeast Illinois that warns of an ice storm that is expected to arrive Sunday morning and last into Sunday night.

According to the agency, the region will be hit with freezing rain, possibly mixed with slee,t that will turn to rain as the temperatures rise above freezing over the course of the day. The agency warns of "significant" ice accumulation, up to a quarter-inch, making travel hazardous and possibly leading to downed tree limbs and power lines.

Because the ground is below freezing, the precipitation will freeze on contact, the agency said, leaving sidewalks as well as streets with that potentially dangerous coating of ice.

The agency also said that the storm "is still in the developing stages" and that any changes in temperature could make a big difference in the nature of the precipitation and how much there is.

chicagobreaking@tribune.com

Twitter: @ChicagoBreaking

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At least 26 die in Egyptian clashes over death sentences

PORT SAID, Egypt/CAIRO (Reuters) - At least 26 people died on Saturday when Egyptians rampaged in protest at the sentencing of 21 people to death over a soccer stadium disaster, adding to bloody street turmoil confronting Islamist President Mohamed Mursi.

Armored vehicles and military police fanned through the streets of Port Said after the violence. The state news agency quoted a general as saying the military aimed to "establish calm and stability in Port Said and to protect public institutions".

Unrest flared with nationwide rallies on Friday to mark the second anniversary of the overthrow of autocrat Hosni Mubarak, a democratic revolution that protesters now accuse Mursi of betraying by ramming through an Islamist-hued constitution.

While anniversary-related violence subsided, a new outbreak hit Port Said after a court sentenced 21 men to die for involvement in the deaths of 74 people after a local soccer match on February 1, 2012, many of them fans of the visiting team.

Residents ran wildly through the streets of Port Said, outraged that men from their city had been blamed for the stadium disaster, and gunshots were reported near the prison where most of the defendants were being held.

Security sources said 26 people, at least two of them policemen, had been killed in the Mediterranean coastal city. State television reported more than 200 people had been wounded.

Witnesses said some men stormed two police stations in Port Said, where protesters lit tires in the street, sending black smoke funneling into the air.

At least nine people were killed in clashes with police on Friday, mainly in the port of Suez where the army has also deployed. Hundreds were injured as police rained down tear gas on protesters armed with stones and some with petrol bombs.

The schism between Islamists and secular Egyptians is hurting efforts by Mursi, freely elected in June, to revive an economy in crisis - deprived of fresh investment and tourism due to political upheaval - and stem a slide in Egypt's currency.

The political strife and lack of security that has blighted the Arab world's most populous country over much of the post-Mubarak era is casting an ominous shadow over a parliamentary election expected to start in April.

DIVERSITY

Highlighting tensions, the opposition National Salvation Front coalition called for a government of national unity and an early presidential vote among other demands. It said it would call for more protests next Friday and could boycott the parliamentary election if its demands are not met.

Mursi's opponents say he has failed to deliver on economic pledges or be a president representing the full political and communal diversity of Egyptians, as he pledged.

His supporters say his critics do not respect the democracy that has given Egypt its first freely elected leader.

The Muslim Brotherhood, which propelled Mursi to office, said in a statement that "corrupt people" and media who were biased against the president had stirred up anger on the street and incited violence.

At the Port Said soccer stadium a year ago, many spectators were crushed and witnesses saw some thrown off balconies after the match between Cairo's Al Ahly and local team al-Masri.

Families of victims in court cheered and wept for joy when Judge Sobhy Abdel Maguid read a list of 21 names "referred to the Mufti", a phrase used to denote execution, as all death sentences must be reviewed by Egypt's top religious authority.

A total of 73 people have been standing trial. Other rulings will be issued on March 9, the judge said.

One relative in the court shouted: "God is greatest." Outside the Al Ahly club in Cairo, fans also cheered. They had threatened more violence unless the death penalty was meted out.

Thousands took to the streets of Cairo, Alexandria and other cities on Friday to protest against what they call the creeping authoritarianism of Mursi's rule. Protesters in Cairo were again hurling stones at police lines in Cairo on Saturday.

SEEKING CHANGE

"We want to change the president and the government. We are tired of this regime. Nothing has changed," said Mahmoud Suleiman, 22, in Cairo's Tahrir Square, the cauldron of the 2011 anti-Mubarak revolt and near where youths stoned police.

Ahmed Salama, 28, a protester camped out with dozens of others in Tahrir, said: "The protests will continue until we realize all the demands of the revolution - bread, freedom and social justice."

Ismailia and Suez, cities which like Port Said lie on the Suez Canal, witnessed some of the worst violence on Friday. But a canal official said the unrest on Friday and Saturday had not disrupted traffic in the waterway vital to international trade.

In a statement in response to Friday's violence, Mursi said the state would not hesitate in "pursuing the criminals and delivering them to justice". He urged Egyptians to respect the principles of the revolution by expressing views peacefully.

The president met on Saturday with the National Defence Council, which includes senior ministers and security officials, to discuss the spate of violence.

In a televised statement, the National Salvation Front said it was holding Mursi responsible for the disturbances.

The Front was formed from disparate groups last year when Mursi awarded himself extra powers and fast-tracked an Islamist-flavored constitution to a referendum, opposed by the Front although the document was passed in the popular vote.

"Egypt will not regain its balance except by a political solution that is transparent and credible, by a government of national salvation to restore order and heal the economy and with a constitution for all Egyptians," prominent opposition politician Mohamed ElBaradei wrote on his Twitter account.

Until the Front was formed, the opposition had struggled to unite and their vote had been split at presidential and parliamentary polls, helping Islamists. The last parliament was dissolved based on court order, demanding a new vote this year.

Mustapha Kamal Al-Sayyid, a professor of political science at Cairo University, said the latest violence reflected the frustration of many liberal-minded Egyptians and others.

"The state of polarization between Islamists and others is most likely to continue and will have a very negative impact on the state's politics, security and economy," he said.

Inspired by the popular uprising in Tunisia, Egypt's revolution spurred further revolts across the Arab world. But the sense of common purpose among Egyptians two years ago has unraveled, triggering bloody street battles last month.

(Additional reporting by Omar Fahmy; Writing by Edmund Blair; Editing by Mark Heinrich)

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P&G earnings lift stocks; S&P set for 8-day win streak

NEW YORK (Reuters) - Stocks advanced on Friday as Procter & Gamble's earnings offset softer-than-expected housing numbers and kept the Standard & Poor's 500 Index on track for its longest winning streak in more than eight years.

Procter & Gamble shares rose 3.7 percent to $73.04 and gave the biggest boost to both the Dow and S&P 500 after the world's top household products maker's quarterly profit soared past expectations. The company also raised its sales and earnings outlook for the fiscal year.

But the stock market's gains were curbed after economic data showed new U.S. single-family home sales fell in December, although expectations for a continued housing sector recovery remain intact. The PHLX housing sector index <.hgx> slipped 0.2 percent.

The benchmark S&P 500 index is up 5 percent so far in January. The equity market's strong start this year has been attributed to solid corporate results, an agreement in Washington to extend the government's borrowing power, encouraging signs from the global economy, and seasonal inflows into stocks.

Those factors helped the S&P 500 rally for a seventh day on Thursday to reach a five-year peak. But the index has struggled to convincingly climb above 1,500, a level it surpassed briefly on Thursday for the first time since December 2007 and momentarily topped again on Friday.

"We hit (1,500) yesterday, we've hit it today, it is going to take a little bit of work to get through it - it's a psychological resistance point," said Paul Mendelsohn, chief investment strategist at Windham Financial Services, in Charlotte, Vermont.

"The housing numbers coming in a little weaker, you would have expected that with Hurricane Sandy and the fiscal cliff," Mendelsohn said. "With everything that was going on in December, you would expect a little weaker number. Maybe analysts were looking for a little too much out of that report."

If the S&P 500 rises for an eighth day on Friday, it will be its longest winning streak since late 2004, when it rallied for nine straight days.

The Dow Jones industrial average <.dji> gained 31.19 points, or 0.23 percent, to 13,856.52. The Standard & Poor's 500 Index <.spx> advanced 3.48 points, or 0.23 percent, to 1,498.30. The Nasdaq Composite Index <.ixic> rose 13.05 points, or 0.41 percent, to 3,143.43.

Honeywell International Inc posted fourth-quarter earnings just above Wall Street's estimates, reflecting the diversified U.S. manufacturer's campaign to boost profit margins in the face of sluggish sales growth. Honeywell's stock shed 0.3 percent to $68.04.

The initial portion of earnings season has been encouraging relative to recent expectations. Overall, S&P 500 fourth-quarter earnings growth is on track for a 2.9 percent rise, up from the forecast of a 1.9 percent gain at the start of earnings season, but well below the 9.9 percent increase in an October 1 forecast.

Thomson Reuters data through Friday showed that of the 147 S&P 500 companies that have reported earnings, 68 percent exceeded expectations. Since 1994, 62 percent of companies have topped expectations, while the average over the past four quarters stands at 65 percent.

Microsoft Corp gained 1.2 percent to $27.95 after posting a quarterly profit that edged lower as Office software sales slowed ahead of a new launch, offsetting a solid but unspectacular start for its Windows 8 operating system.

Halliburton Co shares jumped 5 percent to $39.70 after the world's second-largest oilfield services company reported higher-than-expected earnings and sales for the fourth quarter. Strong international drilling activity offset a slowdown in onshore North America work, Halliburton said.

(Editing by Jan Paschal)

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Murray edges Federer, reaches Australian final

MELBOURNE, Australia (AP) — Andy Murray has finally beaten Roger Federer at a Grand Slam.

The U.S. Open champion beat 17-time major winner Federer 6-4, 6-7 (5), 6-3, 6-7 (2), 6-2 Friday at the Australian Open, calling it a massive confidence boost as he attempts to win his second consecutive major.

Murray, who missed his chance to serve out the match at 6-5 in the fourth set, will play defending champion and top-seeded Novak Djokovic in Sunday's final. Djokovic cruised past David Ferrer in straight sets in just under 90 minutes — 2 1/2 hours less than Murray's semifinal.

Advantage Djokovic.

There was some controversy in that 12th game of the fourth set when Federer appeared to glare and say something to Murray when the Scotsman stopped momentarily behind the baseline during the rally.

Murray ignored it after winning the point, but conceded serve in that game and lost the ensuing tiebreaker before regrouping in the fifth set.

"I mean, it wasn't a big deal," Federer said. "We just looked at each other one time. That's OK, I think. We were just checking each other out for bit. That wasn't a big deal for me — I hope not for him."

While Murray came into the match with a 10-9 career advantage, Murray had never beaten Federer in their three previous meetings at a major — the finals of the 2008 U.S. Open, 2010 Australian Open and last year at Wimbledon.

"It's always tough against him, when he plays in Slams is when he plays his best tennis," Murray said. "When his back was against the wall at 6-5 and I was serving, he came up with some unbelievable shots. I just had to keep fighting."

On Saturday, defending champion Victoria Azarenka will play Li Na of China for the women's singles title. Azaranka needs to win to retain her No. 1 ranking or it will go to Serena Williams.

Also, American brothers Bob and Mike Bryan will play their fifth consecutive Australian Open doubles final and attempt to win a record 13th Grand Slam doubles championship. They'll play the Dutch pair of Robin Haase and Igor Sijsling.

Federer outplayed Murray at stages of the match, but the 25-year-old Scotsman appeared to have the legs and stamina over the 31-year-old Federer in the fifth set, including a service break to clinch the tense match.

"It's big. I never beat Roger in a Slam before. It definitely will help with the confidence," Murray said. "Just knowing you can win against those guys in big matches definitely helps."

Federer said he was playing catch-up all night.

"Definitely it was more of a chase," Federer said. "I think I had my chances a little bit. Obviously, you're going to go through a five-setter with some regrets. But overall, I think Andy was a bit better than I was tonight."

Murray refused to elaborate on the details of the exchange in the fourth set.

"Stuff like that happens daily in tennis matches ... it was very, very mild in comparison to what happens in other sports," Murray said. "It's just one of those things."

Murray said while the outburst didn't "rattle" him, it might have helped Federer get back in the match.

"I think he raised his game, and that's what happens," he said. "Sometimes guys need to get emotion into the match. He definitely raised his level ... in that game I think he hit two balls onto the line and was extremely aggressive after that."

Asked again what Federer had said, Murray reiterated he didn't feel it was "relevant."

"I'm sure Roger won't talk about it and I have no interest in discussing it either, because, like I say, it happens all the time," he said. "People will want to make a big deal of it and it isn't really a big deal.

"It's a very late finish, I'm tired. I don't want to be wasting any energy, because I'll need all of it if I want to win against Novak on Sunday."

With a capacity crowd of 15,000 at Rod Laver Arena watching, including the Australian legend Laver himself, Federer opened the match serving and was in trouble early, losing a 28-rally point to set up break point for Murray. But Federer held the game with a stunning cross-court forehand that just looped over the net from the baseline.

Murray, who had not lost a set through five rounds at Melbourne Park this year, had the first service break — on his fourth break point — to lead 2-1. It came in unusually cool summer conditions in Melbourne — breezy and temperatures of only 60 degrees during most of the match.

The crowd was initially evenly split between Federer and Murray supporters — and at times, they were competing to be heard. At one point in the second set, a group of Murray fans wearing white shirts with blue letters spelling his nickname "Muzza" stood to chant Murray's name, while a group of Federer supporters with Swiss flags on their cheeks and shirts chanted Federer's name.

Earlier Friday, top-seeded Sara Errani and Roberta Vinci of Italy won the first title of 2013 at Melbourne Park, beating the unseeded Australian pair of Ashleigh Barty and Casey Dellacqua 6-2, 3-6, 6-2 for the women's doubles championship.

The 16-year-old Barty was attempting to become the youngest Grand Slam champion since Martina Hingis won the Australian Open singles title in 1997.

Li lost the Australian Open final to Kim Clijsters in 2011 two months before winning her first and only Grand Slam at the French Open.

"Last time was more exciting, (more) nervous because it was my first time to be in a final," Li said. "But I think this time (I'm) more calmed down, more cool."

Azarenka leads 5-4 in career matches, including winning the last four times they've played.

"I'm really hungry to defend my title," Azarenka said. "I've put myself in the position to give it the best shot."

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Davos strives to make climate talk more than hot air

DAVOS, Switzerland (Reuters) – Climate change is back on the global agenda, with debate in the corridors at Davos given fresh impetus by U.S. President Barack Obama and U.N. Secretary-General Ban Ki-moon both highlighting it as top priority this week.

Yet business leaders are still struggling to find the economic incentives to change current practices.

The World Economic Forum (WEF) has not held back in its own assessment of the dangers, with former Mexican president Felipe Calderon warning of “a climate crisis with potentially devastating impacts on the global economy”.

Christine Lagarde, managing director of the International Monetary Fund, summed it up for any Davos doubters: “Unless we take action on climate change, future generations will be roasted, toasted, fried and grilled.”

There is a disconnect, however, between increasing evidence of extreme weather – from Superstorm Sandy in the United States in October to record heat in Australia this month – and the limited response from politicians and businesses.

In some cases the clash is stark, as highlighted on Friday when Greenpeace activists shut down a Shell gas station near the WEF meeting in protest at oil drilling in the Arctic that is made easier by a warmer world.

Many companies tout the opportunities presented by a shift to a low-carbon economy, yet the reality is that the continuing economic crisis has discouraged businesses and governments from developing a truly long-term view.

The rapid growth in shale gas – a greener alternative to coal when it is burned, although not when it leaks into the atmosphere – has also made renewables comparatively less attractive, adding to the challenge.

LACK OF URGENCY

The result is that while global investment in renewables is rising, the world still needs to spend $ 700 billion each year to curb its addiction to fossil fuels, according to a study issued by the WEF this week.

“There is a clear lack of urgency in the climate debate,” said Greenpeace Executive Director Kumi Naidoo. “Big business is holding us back.”

Business, in turn, complains that the failure of governments to provide a clear regulatory framework limits its ability to plan for the future.

After past failures, governments aim to work out a new U.N. plan to address climate change in 2015 but it will only enter into force from 2020.

“Climate change is a long-term issue and it is not clear how it is going to play out or what the returns are going to be,” said PricewaterhouseCoopers International Chairman Dennis Nally.

“So CEOs have to measure how this investment stacks up vis a vis other opportunities that can generate clearer returns.”

In practice, only a quarter of CEOs surveyed by PwC said they planned to raise investment in climate risks as cash is rationed and allocated to projects with the most obvious near-term commercial returns.

That doesn’t mean CEOs are not worried, according Fred Krupp, president of the Environmental Defense Fund, who said virtually every corporation was affected to some degree.

“There was mostly silence on climate change for the last two years at Davos,” Krupp said. “But that has changed. The U.S. drought, especially, has grabbed people’s attention here in Davos because that has had a real effect on prices.”

Also chiming with business leaders is Obama’s argument that the United States cannot afford economically to fall behind in a global clean energy race dominated by countries like China, South Korea and Germany.

“The U.S. has to be among the leaders in this global discussion, so it is a positive development,” Andrew Liveris, CEO of Dow Chemical, said of Obama’s inauguration speech, in which he made climate change a priority for his second term.

RECORD LOW CARBON PRICES

U.N. chief Ban Ki-moon came to Davos with a similar message, saying he was very encouraged by Obama’s speech, while warning that climate change was approaching “much, much faster than one would expect”.

For investors, however, the climate issue remains hard to assess, as shown when the price of European permits to emit carbon fell this week to a new low below 3 euros a tonne, providing minimal incentive for industry to change behavior.

Analysts estimate prices need to be between 20 and 50 euros to make utilities switch to lower-carbon generation.

The question is, when might that carbon risk turn and start to undermine the value of companies heavily reliant on fossil fuels?

The International Energy Agency warned last month that the world will burn around 1.2 billion more tonnes of coal per year by 2017 than it does today – equal to the current coal consumption of Russia and the United States combined.

And an analysis by Ecofys for Greenpeace, presented at Davos, found that just 14 carbon-intensive projects worldwide are set to increase global CO2 emissions by 20 percent, or 6 gigatonnes. They range from coal expansion in Asia to the tar sands of Canada.

When completed, these projects promise to lock in “catastrophic” global warming, according to Greenpeace.

(Editing by David Holmes)

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Cantor CEO: 'Off the fiscal cliff we go'

Part of complete coverage on

By Ramy Inocencio, for CNN

January 25, 2013 -- Updated 1453 GMT (2253 HKT)

STORY HIGHLIGHTS

• "U.S. fiscal cliff still coming" in form of failure to raise debt ceiling - Cantor Fitzgerald CEO


• More than 25% of CEOs feel world economy will get worse in 2013, says PwC survey


• U.S. House of Representatives passed short-term debt ceiling increase Jan. 23


• Lutnick: "Dumb lending" caused 2008 credit crisis

Hong Kong (CNN) -- The world thought the U.S. fiscal cliff deadline was December 31, but "the fiscal cliff is (still) coming", says Howard Lutnick, CEO of global financial services firm Cantor Fitzgerald.

"You're going to watch the U.S. do crazy, crazy things this year," Lutnick told CNN's Richard Quest at the World Economic Forum in Davos, Switzerland. "The Republican Party that was elected to control Congress... (is) going to cross their arms and they are not going to raise the debt ceiling ultimately unless they get severe spending cuts, and the Obama administration is not going to give it to them."

If Congress fails to act, the U.S. and the world economy will have a "dreadful" 2013, Lutnick said.

Following this week's PricewaterhouseCoopers survey of global CEO confidence, Lutnick appears to be one of the more than 25% who think the world economy is more likely to deteriorate in 2013.

Despite Lutnick's concerns, on January 23 the Republican-controlled House of Representatives did pass a bill that would allow the U.S. Treasury to borrow new money through mid-May. President Barack Obama has said he would not oppose the proposal if it reaches his desk, although he prefers a long-term debt ceiling increase.

Lutnick adds that to avoid a repeat of the 2008 financial crisis, regulators need to actually address issues that caused it.

"What caused the credit crisis was just dumb lending. When you lend money to people who can't pay you back, you go broke."

Looking ahead to 2013, Lutnick says the biggest risk to global growth is the U.S. hitting the debt ceiling -- whether in the short- or long-term.

"Off the fiscal cliff we go. We (the U.S.) are irrational and we are silly... we are dopey."

Part of complete coverage on

January 23, 2013 -- Updated 1308 GMT (2108 HKT)

Global policymakers, leading thinkers and key entrepreneurs are gathering in Davos. CNN brings you the latest news, views and musings live.

January 25, 2013 -- Updated 1508 GMT (2308 HKT)

Free trade, transparency and a crackdown on tax cheats will be at the heart of Britain's G8 presidency, Prime Minister David Cameron told the World Economic Forum in Davos on Thursday as he set out his vision for a more competitive Europe.

January 25, 2013 -- Updated 1559 GMT (2359 HKT)

Walk the halls of Davos and you're bound to bump into celebrities, heads of state and even princes and princesses.

January 25, 2013 -- Updated 1155 GMT (1955 HKT)

While Prime Minister David Cameron's speech this week -- voicing his intent to let the British people vote on whether to stay in the European Union -- has caused concern on the continent, the mayor of London says it's all part of democracy.

January 25, 2013 -- Updated 1119 GMT (1919 HKT)

A top European Union official says there's no need for Britain to make threats to leave the union in order to reform its membership.

January 24, 2013 -- Updated 1937 GMT (0337 HKT)

Kenyan Prime Minister Raila Odinga says his country will not negotiate with al Qaeda-linked Somali militants who have threatened to kill Kenyan hostages unless Nairobi releases all Muslims charged with terrorism.

January 24, 2013 -- Updated 1904 GMT (0304 HKT)

LeWeb founder Loic Le Meur is looking to "digital hippies" as a potential theme for his next conference.

January 25, 2013 -- Updated 1347 GMT (2147 HKT)

The head of Airbus says the European aviation giant will take care to learn from its own mistakes -- and rival Boeing's -- ahead of the launch of its new widebody A350 aircraft.

January 23, 2013 -- Updated 1040 GMT (1840 HKT)

As extreme weather events cost the global economy billions each year, the "neglected" risk of climate change seems to be rising to the top of the agenda, Andrew Steer writes.

January 23, 2013 -- Updated 1342 GMT (2142 HKT)

Economic empowerment offers a win-win scenario for Saudi Arabia and its women, Mounira Jamjoon writes.

January 23, 2013 -- Updated 1154 GMT (1954 HKT)

The recession in Europe is entering its fifth year and unemployment doesn't look like it will be returning to normal levels anytime soon.

January 22, 2013 -- Updated 1324 GMT (2124 HKT)

What has been made clear by current events and financial upheavals since 2008 is that the global economy has become truly that -- global.

January 21, 2013 -- Updated 1458 GMT (2258 HKT)

On July 1, 2013 the 27-nation European Union will become 28. But is the Adriatic country ready to join Europe's elite club?

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Streak of days without inch of snow finally over

A relatively meager snowfall created huge headaches for commuters on Friday. CBS's Courtney Gousman capture this video on the Kennedy Expy. around 7:30 a.m. (Source: CBS Chicago)

By Peter Nickeas




Tribune reporter

10:59 a.m. CST, January 25, 2013

More than an inch of snow fell on Chicago today, finally ending a streak that began 335 days ago.

At 9:30 a.m., 1.1 inches of snow was recorded at O'Hare International Airport since midnight. That's the first day an inch or more of snow has fallen there since last February. The previous record was a stretch of 310 days set in 1940.

This morning's light snow also marks the latest it has gone during a winter before an inch of snow has fallen over a day.

Besides ending record streaks, the snow played havoc with the morning rush hour.

Snow started falling in the Chicago area around 4:45 a.m. Within half an hour, Illinois state police were reporting slick conditions on roads and had already responded to six minor accidents. Shortly after 6 a.m., a nine-car crash was reported near North Avenue on the Kennedy Expressway, but there were no reports of serious injuries.

By 7:15 a.m., state police said they had responded to about two dozen crashes on area expressways.

The snow was expected to end this morning.

“Something like this wouldn’t be newsworthy if it wasn’t for the fact it hasn’t snowed all year,” said Gino Izzi, another meteorologist for the weather service.

Still, the Chicago Department of Streets and Sanitation deployed almost 200 of its 284 plow trucks to clear streets of snow and apply salt to the roads.

"We’re going to be monitoring the weather but at this point we’re looking at snowfall at least through the rush hour," said Anne Sheahan, spokeswoman for Streets and Sanitation.

The next bout of snow is not expected until next week.

"We don’t have much of a chance of snow for the next five or six days," Izzi said.

pnickeas@tribune.com
Twitter: @peternickeas

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Violence flares on anniversary of Egypt uprising

CAIRO/ALEXANDRIA (Reuters) - Protesters clashed with police across Egypt on Friday on the second anniversary of the revolt that toppled Hosni Mubarak, taking to the streets against an elected Islamist president whose opponents say is trampling over the new democracy.

At least 61 civilians and 32 security personnel were hurt in violence in Cairo, Alexandria and Suez as police fired tear gas and protesters pelted them with stones, the Interior Ministry said.

Street battles also broke out in Ismaila, where the Muslim Brotherhood's political party offices were torched.

Thousands of opponents of Mursi and his Brotherhood allies massed in Cairo's Tahrir Square - the cradle of the uprising against Mubarak - to revive the demands of a revolution they say has been betrayed by Islamists.

The January 25 anniversary showcased the divide between the Islamists and their secular foes that is hindering President Mohamed Mursi's efforts to revive an economy in crisis and reverse a plunge in Egypt's currency by enticing back investors and tourists.

Inspired by Tunisia's popular uprising, Egypt's revolution spurred further revolts across the Arab world. But the sense of common purpose that united Egyptians two years ago has given way to internal strife that has only worsened and last month triggered lethal street battles.

Before dawn on Friday, police battled protesters who threw petrol bombs and firecrackers as they tried to approach a wall blocking access to government buildings near Tahrir Square.

Clouds of tear gas fired by police filled the air. At one point, riot police used one of the incendiaries thrown at them to set ablaze at least two tents erected by the youths, a Reuters witness said.

Clashes between stone-throwing youths and the police continued in streets around the square into the day. Ambulances ferried away a steady stream of casualties.

"Our revolution is continuing. We reject the domination of any party over this state. We say no to the Brotherhood state," Hamdeen Sabahy, a popular leftist leader, told Reuters.

There were similar scenes in Suez and Alexandria, where protesters and riot police skirmished near local government offices. Tear gas fouled the air and black smoke billowed from tyres set ablaze by youths.

Some protesters pledged to march to Mursi's Cairo palace.

The anniversary brought thousands of Mursi's opponents into the streets of other cities, including Port Said at the northern mouth of the Suez Canal and al-Mahalla al-Kubra in the Nile Delta.

The Brotherhood decided against mobilizing for the anniversary, wary of the scope for more conflict after violence in December that was stoked by Mursi's decision to fast-track an Islamist-tinged constitution rejected by his opponents.

"The Brotherhood is very concerned about escalation, that's why they have tried to dial down their role on January 25," said Shadi Hamid, director of research at the Brookings Doha Center.

"It's definitely tense on the ground, but so far there hasn't been anything out of the ordinary or anything that really threatens to fundamentally alter the political situation."

In Tahrir Square, protesters echoed the chants of 2011's historic 18-day uprising. "The people want to bring down the regime," they chanted. "Leave! Leave! Leave!" chanted others as they marched towards the square.

"We are not here to celebrate but to force those in power to submit to the will of the people. Egypt now must never be like Egypt during Mubarak's rule," said Mohamed Fahmy, an activist.

BADIE CALLS FOR "PRACTICAL, SERIOUS COMPETITION"

With its eye firmly on forthcoming parliamentary elections, the Brotherhood marked the anniversary with a charity drive across the nation. It plans to deliver medical aid to one million people and distribute affordable basic foodstuffs.

Writing in Al-Ahram, Egypt's flagship state-run daily, Brotherhood leader Mohamed Badie said the country was in need of "practical, serious competition" to reform the corrupt state left by the Mubarak era.

"The differences of opinion and vision that Egypt is passing through is a characteristic at the core of transitions from dictatorship to democracy, and clearly expresses the variety of Egyptian culture," he wrote.

Still, Mursi faces discontent on multiple fronts.

His opponents say he and his group are seeking to dominate the post-Mubarak order. They accuse him of showing some of the autocratic impulses of the deposed leader by, for example, driving through the new constitution last month.

"I am taking part in today's marches to reject the warped constitution, the 'Brotherhoodisation' of the state, the attack on the rule of law, and the disregard of the president and his government for the demands for social justice," Amr Hamzawy, a prominent liberal politician, wrote on his Twitter feed.

The Brotherhood dismisses many of the criticisms as unfair fabrications of their rivals, accusing them of failing to respect the rules of the new democracy that put the Islamists in the driving seat by winning free elections.

Six months into office, Mursi is also being held responsible for an economic crisis caused by two years of turmoil. The Egyptian pound has sunk to record lows against the dollar.

SOURCES OF FRICTION ABOUND

Other sources of friction abound. Little has been done to reform brutal Mubarak-era security agencies. A spate of transport disasters on roads and railways neglected for years is feeding discontent as well. Activists are impatient for justice for the victims of violence over the last two years.

These include hardcore soccer fans, or ultras, who have been rallying in recent days to press for justice for 74 people killed in a soccer stadium disaster a year ago in Port Said after a match between local side al-Masry and Cairo's Al Ahly.

The parties that called for Friday's protests listed demands including a complete overhaul of the constitution.

Critics say the constitution, which was approved in a referendum, offers inadequate protection for human rights, grants the president too many privileges and fails to curb the power of a military establishment supreme in the Mubarak era.

Mursi's supporters say that enacting the constitution quickly was crucial to restoring stability desperately needed for economic recovery, and that the opposition is making the situation worse by perpetuating unrest.

(Additional reporting by Ashraf Fahim, Tom Perry, Marwa Awad and Shaimaa Fayed in Cairo and Yousri Mohamed in Ismailia; Writing by Tom Perry; Editing by Angus MacSwan)

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Wall Street advances despite Apple decline

NEW YORK (Reuters) - The Dow and S&P 500 advanced on Thursday, with the benchmark S&P index moving through the 1,500 level as solid economic data enabled investors to shrug off a steep decline in Apple shares.

Apple Inc dropped 10.1 percent to $462.17 after the technology giant missed Wall Street's revenue forecast for a third straight quarter as iPhone sales were poorer than expected, fanning fears its dominance of consumer electronics is slipping.

The drop wiped out roughly $50 billion in Apple's market capitalization to $435 billion, leaving the company vulnerable to losing its status as the most valuable U.S. company to second place ExxonMobil Corp, at $417 billion.

A trio of economic reports helped buoy the market, with data showing a decline in weekly jobless claims and an increase in manufacturing, while a gauge of future economic activity climbed.

"The S&P is up, that is a very important inflection point that a stock such as Apple can take a hit and the market can stay strong - that is because the U.S. economy is broadly getting stronger across the board," said Mike Binger, portfolio manager at Gradient Investment in Shoreview, Minnesota.

"Apple has been topping the headlines for the last three to four years. That phase is obviously past us and people are starting to talk about different stocks and they are gravitating towards different stocks."

The gains marked the first time the S&P 500 had risen above 1,500 since December 12, 2007 and put the index on pace for its seventh straight advance.

The advance for the S&P, and muted declines in the Nasdaq in spite of the decline in Apple, were viewed as a positive sign, as investors take encouragement from an improving global economy and move into stocks more closely tied to economic fortunes, such as industrials.

General Electric rose 1 percent to $22.16 and United Parcel Service gained 2 percent to $81.98. Of the 10 major S&P sectors, only technology, off 1.3 percent, was lower.

The Dow Jones industrial average gained 85.42 points, or 0.62 percent, to 13,864.75. The Standard & Poor's 500 Index gained 5.69 points, or 0.38 percent, to 1,500.50. The Nasdaq Composite Index dropped 5.84 points, or 0.19 percent, to 3,147.83.

The domestic data was in sync with those overseas showing growth in Chinese manufacturing accelerated to a two-year high this month and a buoyant Germany took the euro zone economy a step closer to recovery.

Apple's disappointing results drew a round of price-target cuts from brokerages. At least 14 brokerages, including Barclays Capital, Credit Suisse and Deutsche Bank, cut their price target on the stock by $142 on average. Morgan Stanley removed the stock from its 'best ideas' list.

In contrast to Apple, Netflix Inc surprised Wall Street Wednesday with a quarterly profit after the video subscription service added nearly 4 million customers in the U.S. and abroad. Shares surged 36.9 percent to $141.36, its biggest percentage jump ever.

Diversified U.S. manufacturer 3M Co reported a 3.9 percent rise in profit, meeting expectations, on solid growth in sales of its wide array of products, which range from Post-It notes to films used in television screens. The shares edged up 0.2 percent to $99.66.

Corporate earnings have helped drive the recent stock market rally. Thomson Reuters data through early Thursday showed that of the 133 S&P 500 companies that have reported earnings, 66.9 percent have exceeded expectations, above the 65 percent average over the past four quarters.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

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NCAA announces problems with Miami investigation

CORAL GABLES, Fla. (AP) — The NCAA's probe of Miami's athletic compliance practices is ramping up again.

Only this time, the Hurricanes aren't exactly the subject of the inquiry.

In a bizarre twist, the college sports' governing body is being investigated after NCAA President Mark Emmert acknowledged on Wednesday "a very severe issue of improper conduct" by former investigators working the long, complex Miami case.

The NCAA said its investigation was based, at least in part, on information that it should not have had access to, the testimony of those who appeared under subpoena to be deposed in the bankruptcy case involving former Miami booster Nevin Shapiro, one of the most notorious Ponzi scheme architects in history.

The NCAA does not have subpoena power. Shapiro's attorney did, and used it — and apparently entered into some sort of contractual agreement with the NCAA, one that apparently either was not or should never have been approved.

"We cannot have the NCAA bringing forward an allegation ... that was collected by processes none of us could stand for," Emmert said. "We're going to move it as fast as possible, but we have to get this right."

Speaking Thursday from Providence, R.I. in a telephone interview, Shapiro's attorney, Maria Elena Perez, told The Associated Press that she has done nothing wrong.

"The dubious party is not me. What I have done is 150 percent above board," Perez said.

Perez said she could not divulge the nature of whatever her contract status with the NCAA, though said she is planning to release a statement in the coming days after meeting with her own attorney.

"I am a victim of the enforcement staff," said Perez, who is a Miami graduate. "Me."

The revelations Wednesday mean the notice of allegations against Miami — the NCAA's findings of wrongdoing, a document that was nearly completed and was expected to be released by the end of this week — will be delayed for at least a few more weeks, if not longer. The long-term ramifications could be more damning for the NCAA, especially if the outside investigator they have commissioned to look into the mess finds more problems.

"As we have done since the beginning, we will continue to work with the NCAA and now with their outside investigator hoping for a swift resolution of the investigation and our case," Miami President Donna Shalala said.

Emmert said two depositions are involved in this allegation of improper conduct by former enforcement-office staffers. One of those two depositions was given Dec. 19, 2011, by former Miami equipment-room staffer Sean Allen — who has been linked to Shapiro and many of the allegations that he made against the university.

Among the questions Allen was asked in that deposition:

— "Did you ever witness Mr. Shapiro paying any money to any University of Miami football or basketball players?"

— "Would it be fair to say that Mr. Shapiro did, in fact, confer various financial benefits on the University of Miami Athletic Program and its players?"

— "Did you ever overhear any of the coaches or any other staff for the University of Miami providing Mr. Shapiro with inside information regarding, you know, the condition of any particular athlete for the purposes of Mr. Shapiro's gambling?"

It's unknown which of Allen's answers caught the NCAA investigators' attention.

What is known publicly now, and has been suspected by some for months, is that those investigators never should have known those questions were asked.

"How in the world can you get this far without it being recognized that this was an inappropriate way to proceed?" Emmert asked.

That's the question that the NCAA wants answered, and fast.

Emmert spoke angrily at times during a half-hour conference call to discuss the findings, in which he revealed that he briefed the NCAA's executive committee and the Division I board presidents with some information about the Miami matter. He said he developed a better understanding of what went on in the days that followed, which led to the hiring of Kenneth L. Wainstein of the firm Cadwalader, Wickersham & Taft LLP to conduct the external review of what happened.

Wainstein, Emmert said, will begin his probe on Thursday, with the NCAA hoping that he can finish within two weeks.

"We want to make sure that any evidence that's brought forward is appropriately collected and it has the integrity that we expect and demand," Emmert said.

It was part of a stunning day for Hurricane athletics: The 25th-ranked men's basketball team routed No. 1 Duke later Wednesday, 90-63.

Emmert said the NCAA was trying to find out why part of the investigation was based on depositions specific to the bankruptcy case against Shapiro, who will have to repay $82.7 million to his victims as part of his sentence. And the timing of this also is curious. Several people who were to be named in the NCAA's notice of allegations against Miami have been told that the document was in the final stages of preparation — and one person who spoke with the AP said at least one person who was to face a charge of wrongdoing was told the letter was scheduled for delivery to Miami on Tuesday.

Now it's anyone's guess when that will happen.

Emmert said the NCAA learned of the alleged misconduct, in part, through legal bills presented by Shapiro's attorney for work that was not properly approved by the organization's general counsel's office.

"One of the questions that has to be answered, unequivocally, is what was the nature of that contractual arrangement and what was all the activity that that individual was involved with," Emmert said. "There is some uncertainty about all of that and it's one of the first orders of business for the firm that we've hired to investigate."

The Hurricanes' athletic compliance practices have been probed by the NCAA for nearly two years. Allegations of wrongdoing involving Miami's football and men's basketball programs became widely known in August 2011 when Yahoo Sports published accusations brought by Shapiro, who is serving a 20-year term in federal prison for masterminding a $930 million Ponzi scheme.

Miami has self-imposed two football postseason bans in response to the investigation. The Hurricanes also would have played in the Atlantic Coast Conference championship game this past season, meaning they could have qualified for the Orange Bowl.

"In my two-and-a-half years I've certainly never seen anything like this, and don't want to see it again," Emmert said.

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