Citigroup to seek permission to buy back shares - WSJ

NEW YORK (Reuters) - Citigroup Inc is planning to ask regulators for permission to buy back a "minimal" number of shares, the Wall Street Journal reported on Friday.
The bank is not planning to ask to increase its quarterly dividend, which is currently a penny a share, the newspaper reported, citing people familiar with the company's plans.
Citigroup Chairman Michael O'Neill and newly installed CEO Michael Corbat have told company executives that the capital plan the company submits to the Federal Reserve must be so conservative that it will not be rejected, the Journal said.
Big banks are due to submit their capital plans to the Fed on Monday.
Another bank, JPMorgan Chase & Co , has reason to be "cautiously optimistic" about its chances of winning approval to raise its dividend and buy back more stock, an official who asked not to be named told Reuters.
In November, JPMorgan won approval from the Fed to resume previously approved buybacks it had suspended in May after a multi-billion dollar loss surfaced on derivatives transactions in its London office. JPMorgan's operations have generated more than enough capital to cover those losses.
The Journal reported that Morgan Stanley will focus its plan for the Fed on using its capital to complete its purchase of Citigroup's minority stake of a joint venture the two companies have in a wealth-management business. A spokesman for the investment bank declined to comment.
Citigroup's last annual plan was rejected by the Fed in March after former CEO Vikram Pandit led analysts and investors to believe the company would be allowed to spend a few billion dollars on share buybacks and additional dividends. The rejection became a major embarrassment for the bank and contributed to the board's decision to replace Pandit.

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"Cliff" concerns give way to earnings focus

NEW YORK (Reuters) - Investors' "fiscal cliff" worries are likely to give way to more fundamental concerns, like earnings, as fourth-quarter reports get under way next week.
Financial results, which begin after the market closes on Tuesday with aluminum company Alcoa , are expected to be only slightly better than the third-quarter's lackluster results. As a warning sign, analyst current estimates are down sharply from what they were in October.
That could set stocks up for more volatility following a week of sharp gains that put the Standard & Poor's 500 index <.spx> on Friday at the highest close since December 31, 2007. The index also registered its biggest weekly percentage gain in more than a year.
Based on a Reuters analysis, Europe ranks among the chief concerns cited by companies that warned on fourth-quarter results. Uncertainty about the region and its weak economic outlook were cited by more than half of the 25 largest S&P 500 companies that issued warnings.
In the most recent earnings conference calls, macroeconomic worries were cited by 10 companies while the U.S. "fiscal cliff" was cited by at least nine as reasons for their earnings warnings.
"The number of things that could go wrong isn't so high, but the magnitude of how wrong they could go is what's worrisome," said Kurt Winters, senior portfolio manager for Whitebox Mutual Funds in Minneapolis.
Negative-to-positive guidance by S&P 500 companies for the fourth quarter was 3.6 to 1, the second worst since the third quarter of 2001, according to Thomson Reuters data.
U.S. lawmakers narrowly averted the "fiscal cliff" by coming to a last-minute agreement on a bill to avoid steep tax hikes this weeks -- driving the rally in stocks -- but the battle over further spending cuts is expected to resume in two months.
Investors also have seen a revival of worries about Europe's sovereign debt problems, with Moody's in November downgrading France's credit rating and debt crises looming for Spain and other countries.
"You have a recession in Europe as a base case. Europe is still the biggest trading partner with a lot of U.S. companies, and it's still a big chunk of global capital spending," said Adam Parker, chief U.S. equity strategist at Morgan Stanley in New York.
Among companies citing worries about Europe was eBay , whose chief financial officer, Bob Swan, spoke of "macro pressures from Europe" in the company's October earnings conference call.
REVENUE WORRIES
One of the biggest worries voiced about earnings has been whether companies will be able to continue to boost profit growth despite relatively weak revenue growth.
S&P 500 revenue fell 0.8 percent in the third quarter for the first decline since the third quarter of 2009, Thomson Reuters data showed. Earnings growth for the quarter was a paltry 0.1 percent after briefly dipping into negative territory.
On top of that, just 40 percent of S&P 500 companies beat revenue expectations in the third quarter, while 64.2 percent beat earnings estimates, the Thomson Reuters data showed.
For the fourth quarter, estimates are slightly better but are well off estimates for the quarter from just a few months earlier. S&P 500 earnings are expected to have risen 2.8 percent while revenue is expected to have gone up 1.9 percent.
Back in October, earnings growth for the fourth quarter was forecast up 9.9 percent.
In spite of the cautious outlooks, some analysts still see a good chance for earnings beats this reporting period.
"The thinking is you need top line growth for earnings to continue to expand, and we've seen the market defy that," said Mike Jackson, founder of Denver-based investment firm T3 Equity Labs.
Based on his analysis, energy, industrials and consumer discretionary are the S&P sectors most likely to beat earnings expectations in the upcoming season, while consumer staples, materials and utilities are the least likely to beat, Jackson said.
Sounding a positive note on Friday, drugmaker Eli Lilly and Co said it expects profit in 2013 to increase by more than Wall Street had been forecasting, primarily due to cost controls and improved productivity.

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Fed officials suggest possible end to asset purchases in 2013

SAN DIEGO (Reuters) - The Federal Reserve could halt its asset purchases this year, two top Fed officials suggested on Friday, a view also gaining traction among economists at Wall Street's top financial institutions.

St. Louis Fed President James Bullard, a voting member of the Fed's monetary policy panel in 2013, said a drop in the unemployment rate to 7.1 percent would probably constitute the "substantial improvement" in the labor market that the central bank seeks.

That's the bar for the Fed's policy-setting committee to halt the current round of asset purchases that it began in September. The Fed is currently buying $40 billion in mortgage-backed securities and $45 billion in Treasuries each month in a bid to push down borrowing costs and spark faster growth.

"If we get even moderately good growth this year I would expect unemployment to continue to tick down," Bullard later told reporters. "I would say that that would put the committee in a good position to think about doing a pause with the balance sheet policy."

Bullard also acknowledged that he had a more optimistic view on unemployment than some other Fed officials, and sees it in the "low 7's" by year-end.

Thousands of economists have gathered in San Diego for the annual American Economic Association meeting, drawing some of the biggest names in the profession as well as top policymakers.

Bullard stressed that the Fed would decide about changing its bond-buying program on the basis of the outlook for the labor market, and said that if it decided to pause, and then saw conditions weaken, it might resume the purchases.

The Fed has also promised to keep interest rates at their current near-zero level until unemployment drops to 6.5 percent, as long as inflation does not threaten to rise above 2.5 percent.

Philadelphia Fed Bank President Charles Plosser, who spoke separately at the conference, said he expects unemployment to drop to between 6.8 percent and 7.0 percent by the end of 2013.

As a result, he hopes the Fed will stop buying bonds before the 6.5 percent threshold, implying he anticipates the asset purchases could halt this year. Unemployment registered 7.8 percent last month.

Economists at nine of 16 primary dealers -- the large financial institutions that do business directly with the Fed -- told Reuters on Friday they expect the Fed to end its Treasuries purchases in 2013.

Fed policymakers are increasingly concerned about the impact of their monthly purchases, which currently total $85 billion.

Minutes from their December policy meeting showed that "several" top officials expected to slow or stop the so-called quantitative easing program, dubbed QE3, "well before" the end of the year - news that surprised some on Wall Street and prompted a drop in stocks and bonds, and a rise in the dollar.

CREDIBILITY

Meanwhile, another top Fed official warned the U.S. central bank's aggressive easing plan threatens the Fed's credibility.

Jeffrey Lacker, president of the Richmond Fed, on Friday held his ground opposing QE3, arguing that continued monetary policy is not the appropriate way to tackle the problem.

"It is unlikely that the Federal Reserve can push real growth rates materially higher than they otherwise would be, on a sustained basis," Lacker, who dissented on all Fed easing moves last year, told a meeting of the Maryland Bankers Association.

The U.S. economy expanded 3.1 percent in the third quarter on an annualized basis, but growth is believed to have slowed sharply to barely above 1.0 percent in the last three months of the year.

"I see an increased risk, given the course the committee has set, that inflation pressures emerge and are not thwarted in a timely way," he said.

Bullard, speaking on a panel in San Diego, warned that central bankers, in fighting to stabilize financial markets, have sacrificed some of their cherished independence, an attribute many Fed historians and policymakers argue is key to keeping inflation under control.

Bullard singled out the European Central Bank as one of the worst offenders, but warned more broadly about the "creeping politicization" of central banking globally -- something that he said would deliver disappointing economic results.

EYEING 7.1 PERCENT UNEMPLOYMENT

While Lacker and Plosser are outspoken policy hawks, Bullard is more of a centrist who is nonetheless toward the hawkish end of the spectrum of Fed officials. The three were the first top central bank officials to speak publicly since the minutes were unveiled on Thursday.

After the December meeting, the Fed said it would continue buying bonds until the labor market outlook improves "substantially," which Fed Chairman Ben Bernanke has characterized as a "sustained" decline in the unemployment rate.

Government data released on Friday showed the U.S. jobless rate held steady from November to December. Bullard called the December jobs number - a boost of 155,000 in new non-farm jobs - "reasonably good.

Fed Vice Chair Janet Yellen, a proponent of aggressive Fed easing, also spoke at the conference on Friday, but confined her comments to how regulators are tackling risks to financial stability.

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Gunman kills 3 people, injures 2 in Swiss village

A shooting in southern Switzerland has left three women dead, two men wounded and highlighted the ease of access to firearms in gun-loving nations.
The shooting — which came on the eve of students' return to classes in Newtown, Connecticut, after a horrific school shooting — also raised questions about why a troubled suspect was able to go on a rampage with an old military rifle.
The suspect, a 33-year-old unemployed man living on disability payments, fired about 20 shots Wednesday night in the village of Daillon, authorities in the Swiss canton (state) of Valais said Thursday.
He opened fire from his apartment and pursued people in the street, police said. Armed with a Swiss military rifle and a handgun, the man then threatened to shoot the elite troops that were sent in to stop him, police said.
"The shooter pointed his weapon at our colleagues, so they had to open fire to neutralize him, to avoid being injured themselves," police spokesman Jean-Marie Bornet told Swiss radio.
The suspect, who police did not identify, was arrested and taken to the hospital with serious wounds. Bornet said the shooter lived in Daillon but the motive for the shooting was not clear.
The suspect was using a military rifle that was once standard issue in the Swiss army, interim cantonal police chief Robert Steiner said.
Guns are popular among the Swiss — the Alpine country has at least 2.3 million weapons among a population of less than 8 million. Gun clubs are popular in rural areas, with children as young as 10 taking part in shooting competitions.
Authorities say firearms are involved in nearly a quarter of the 1,100 suicides a year in Switzerland — which don't include another 300 cases a year of assisted suicide — but shooting rampages are rare in peaceful, prosperous Switzerland.
A gunman who killed 14 people at a city meeting in Zug in 2001 was the nation's worst such rampage, leading to calls to tighten national gun-buying laws. Friedrich Leibacher used a commercial version of the Swiss army's SG 550 assault rifle for the rampage, then killed himself.
Buying a firearm in a Swiss shop requires a permit, a clean criminal record and no psychiatric disability, but buying a firearm from another person is less restrictive. Most types of ammunition can be bought, while automatic firearms generally require a special police permit.
The police said they are still unclear about the shooter's motive — or where he got the guns — but old-style Army rifles are often sold at military surplus markets. Prosecutor Catherine Seppey said the shooter knew several of the victims but "he was not known for making threats."
The suspect was unemployed and had been receiving psychiatric care since at least 2005, when he was first admitted to a psychiatric hospital, and was under the care of the cantonal agency for the disabled, Seppey said.
The victims were three women aged 32, 54 and 79 who died at the scene, and two injured men, aged 33 and 63, who were taken to the hospital, Seppey said. The two youngest victims were a couple with small children.
"We have no words to express ourselves after an event like this," Christophe Germanier, head of the Conthey district where the shooting occurred, told a news conference.
All able-bodied Swiss men who are required to perform military duty often take their army-issued rifle home with them after completing military service. In 2007, the government began requiring that nearly all army ammunition is kept at secure army depots.
In 2011, voters rejected a proposal to tighten the gun laws.
Many in Switzerland believe that distributing guns to households helped dissuade a Nazi invasion during World War II.
"This is part of Switzerland's self-defense, where the entire army can be mobilized in 24 hours, said Daniel Warner of the Geneva Center for the Democratic Control of Armed Forces. "I don't think (the latest shooting) is going to cause a change in attitude here.

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Briton on trial for hurling abuse and bottle at Usain Bolt

LONDON (Reuters) - A British man went on trial on Thursday accused of screaming abuse at Usain Bolt and hurling a beer bottle onto the track as the Olympic men's 100 metres final was starting, a climactic moment of the London Games in August.
The court heard that the packed 80,000-seat Olympic Stadium had fallen silent in anticipation of the race when Ashley Gill-Webb, 34, began shouting insults like "Usain I want you to lose, Usain you are bad, you are an arsehole".
The Jamaican sprinter did not hear the abuse or see a green Heineken bottle land behind the starting line, and went on to win the race in 9.63 seconds, the second-fastest time recorded.
Gill-Webb did not have a ticket to attend the 100 metres final but had somehow pushed his way to the front of an exclusive seating area, among members of the Dutch Olympic team.
After his outburst, Gill-Webb was confronted by Dutch judoka Edith Bosch, an Olympic bronze medallist, then restrained by volunteer workers and arrested.
He has pleaded not guilty to a public order offence, the Press Association (PA) reported from Stratford Magistrates' Court in east London, without saying what penalties he might face.
"In the stadium, along with the many thousands who should have been there legitimately and were watching the race in hushed anticipation, was also Mr Gill-Webb who it is now accepted was unwell at the time," said prosecutor Neil King.
"This bottle landed extremely close to the athletes and it's probably luck rather than Mr Gill-Webb's judgment that it did not do anything far more serious," said King, quoted by the PA.
In a written witness statement read out in court, Bosch said Gill-Webb's taunts against Bolt had gone on for about two minutes. As he started to move away after tossing the beer bottle, she confronted him, saying: "Dude, are you crazy?"
"He was trying to walk away so I pushed him hard to stop him," Bosch said in her statement. "I was angry with what he had done which was so disrespectful."
"I was sad to miss the 100 metres," she added.
The court heard that Gill-Webb's behaviour after he was escorted to a police station had been "somewhat unusual".
He gave some "no comment" answers to police questions but also handed over a prepared statement signed "Alan Cumming", the name of a Scottish actor.
He maintained he had nothing to do with throwing the bottle but said he had been "quite hyper" in the stadium.
Prosecutor King said although it was accepted Gill-Webb was unwell at the time, he knew what he was doing and intentionally caused distress to those around him.

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Swiss gunman kills 3 people, had troubled history

 A shooting in southern Switzerland has left three women dead, two men wounded and raised questions about how a troubled suspect was able to go on a rampage with an old military rifle.
The shooting — which came on the eve of students' return to classes in Newtown, Connecticut, after a horrific school shooting — also highlighted the easy access to firearms in gun-loving nations.
The suspect, a 33-year-old unemployed man living on disability payments, fired about 20 shots Wednesday night in the village of Daillon, authorities in the Swiss canton (state) of Valais said Thursday.
He opened fire from his apartment and pursued people in the street, police said. Armed with a Swiss military rifle and a handgun, he then threatened to shoot the officers sent in to stop him, police said.
"The shooter pointed his weapon at our colleagues, so they had to open fire to neutralize him, to avoid being injured themselves," police spokesman Jean-Marie Bornet told Swiss radio.
The suspect, who police did not identify, was arrested and taken to the hospital with serious wounds. Bornet said he lived in Daillon but the motive for the shooting was unclear.
Guns are popular among the Swiss — the Alpine country has at least 2.3 million weapons among a population of less than 8 million. Many rural areas have gun clubs, with children as young as 10 taking part in shooting competitions.
The suspect was using a military rifle that was once standard issue in the Swiss army, interim cantonal police chief Robert Steiner said.
Prosecutor Catherine Seppey said the suspect was unemployed and had been receiving psychiatric care since at least 2005, when he was first admitted to a psychiatric hospital. He was currently under the care of the cantonal agency for the disabled, she said.
His weapons were confiscated and destroyed in 2005, she said, "and currently no arms register showed he had a weapon. The inquiry will have to determine where the weapons came from."
Buying a firearm in a Swiss shop requires a permit, a clean criminal record and no psychiatric disability, but buying a firearm from another person is less restrictive and old-style Army rifles are often sold at military surplus markets.
Most types of ammunition can be bought, while automatic firearms generally require a special police permit.
Seppey said the shooter knew several of the victims but "he was not known for making threats."
The victims were three women aged 32, 54 and 79 who died at the scene, and two injured men, aged 33 and 63, who were taken to the hospital, Seppey said. The two youngest victims were a couple with small children.
"We have no words to express ourselves after an event like this," Christophe Germanier, head of the Conthey district where the shooting occurred, told a news conference.
Daillon is near some of Switzerland's most popular ski resorts, such as Verbier and Crans-Montana, and is in the country's main wine-producing region. The area also boasts a sizeable share of the country's federally protected hunting reserves.
Authorities say firearms are involved in nearly a quarter of the 1,100 suicides a year in Switzerland — which don't include another 300 cases a year of assisted suicide — but shooting rampages are rare in peaceful, prosperous Switzerland.
A gunman who killed 14 people at a city meeting in Zug in 2001 was the nation's worst rampage, leading to calls to tighten national gun-buying laws. Friedrich Leibacher used a commercial version of the Swiss army's SG 550 assault rifle for the rampage, then killed himself.
All able-bodied Swiss men who are required to perform military duty often take their army-issued rifle home with them after completing military service. In 2007, the government began requiring that nearly all army ammunition is kept at secure army depots.
Many in Switzerland believe that distributing guns to households helped dissuade a Nazi invasion during World War II. In 2011, Swiss voters rejected a proposal to tighten gun laws.
"This is part of Switzerland's self-defense, where the entire army can be mobilized in 24 hours," said Daniel Warner of the Geneva Center for the Democratic Control of Armed Forces. "I don't think (the latest shooting) is going to cause a change in attitude here.

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British government extradites al-Qaida suspect

WASHINGTON (AP) — Police in Britain have extradited a terror suspect to the United States to face charges that he took part in an alleged al-Qaida plot to detonate explosives aboard the New York City subway system.
British authorities handed over Abid Naseer, 26, to U.S. authorities on Thursday.
Prosecutors want Naseer to stand trial in New York for his alleged role in a terror campaign that would have also struck targets in Britain and Norway.
Federal prosecutors in Brooklyn have said they aim to prove that Naseer collected bomb ingredients, conducted reconnaissance and was in frequent contact with other al-Qaida operatives as part of a foiled New York plot and a second suspected plot to bomb a busy shopping area in the northern English city of Manchester.
Naseer "is one of a long line of terrorist suspects extradited to these shores," said U.S. Attorney Loretta Lynch in Brooklyn. She said the extradition underscored the importance of international cooperation in bringing down terror suspects.
Naseer was due in federal court Monday. If convicted in the U.S., Naseer would face a maximum penalty of life in prison. At the Justice Department, spokesman Dean Boyd declined to comment.
Naseer was one of 12 people arrested in a counterterrorism operation in April 2009, but all were subsequently released without charge. They were ordered to leave Britain, but Naseer escaped deportation to Pakistan after a judge ruled it was likely he would be mistreated if he were sent home.
Naseer was re-arrested in July 2010 at the request of the prosecutors in Brooklyn, where a federal indictment named him as a co-defendant with Adis Medunjanin.
In January 2011, a British judge approved Naseer's extradition. The judge acknowledged there was a "very real risk" Naseer would be tortured if the U.S. ultimately returned him to Pakistan but said he believed the U.S. justice system would not ignore that concern.
Naseer's lawyer had argued that the U.S. would have fewer inhibitions about returning him to Pakistan.
U.S. authorities allege Medunjanin and former high school friends Najibullah Zazi and Zarein Ahmedzay — all three attended Flushing High School in Queens — traveled to Pakistan in 2008 to seek terror training from al-Qaida.
Zazi, an airport van driver from Colorado, admitted in a guilty plea that once back from Pakistan he tested peroxide-based explosive materials in a makeshift lab in Denver in the fall of 2009 before traveling by car to New York to carry out the scheme.
Authorities say Medunjanin and Ahmedzay agreed to join Zazi in three coordinated suicide bombings on Manhattan subway lines during rush hour near the eighth anniversary of the Sept. 11 terror attacks — what Zazi called a "martyrdom operation."
The plot was disrupted when police stopped Zazi's car as it entered New York.
At Medunjanin's trial last year, Zazi and Ahmedzay, who testified as part of a plea deal, told jurors that the scheme was designed to avenge the U.S. invasion of Afghanistan. Medunjanin was sentenced to life in prison.

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Northern Irish police injured as flag row turns violent again

 Eight police officers were injured in Northern Ireland on Thursday when protests at the removal of the British flag from Belfast City Hall turned violent for the first time in more than two weeks.
Pro-British loyalists began rioting and fighting street battles with police after a decision a month ago by mostly nationalist pro-Irish councillors to end the century-old tradition of flying the British flag from City Hall every day in the British-controlled province.
More than 40 police officers were injured in the initial wave of violence, which stopped over Christmas. Protesters took to the streets in recent days but had remained peaceful until Thursday, when the community divisions were exposed once more.
At least 3,600 people were killed during Northern Ireland's darkest period as Catholic nationalists seeking union with Ireland fought British security forces and mainly Protestant loyalists determined to remain part of the United Kingdom.
Missiles, including petrol bombs, rained down on police in the Mountpottinger area of Belfast, a loyalist stronghold that borders the only Catholic enclave in the east of the city. A burning barricade was also used to block a major route into the city centre and a nearby car was set on fire.
Police said a crowd of around 100, some in masks and waving British flags, were involved in the unrest that lasted for several hours and led to two arrests.
Almost 50 rioters have been charged so far, the youngest a boy of 11, after deeming the vote to only fly the Union flag on 17 specified days a year - such as Queen Elizabeth's birthday - as a step too far in the ebbing away of Protestant dominance.
The protests marred a visit by U.S. Secretary of State Hillary Clinton who travelled to Belfast last month to lend her support to a 15-year-old peace process that helped mostly end three decades of sectarian bloodshed.
Another rally outside City Hall has been scheduled for Saturday and organisers say the demonstrations will continue until the flag is restored to the City Hall roof.
The now regular weekend rallies have mostly remained peaceful but disrupted pre-Christmas trade in Belfast city centre shops.

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Just Explain It: Why the Fiscal Cliff May Trigger a Recession

Lawmakers in Washington appear to be making little to no progress in avoiding the impending so-called fiscal cliff.  House Speaker John Boehner, R-Ohio, said Friday the negotiations are "almost nowhere." On Thursday Boehner rejected a proposal from the Obama administration saying that the Democrats need to "get serious about real spending cuts."
President Obama's offer continues to call for higher taxes on the wealthy and an extension of the payroll tax cut.   But Republicans say they will not agree to a plan that raises taxes.
As the country continues to head toward the fiscal cliff, this Just Explain It helps to make sense of what it is.
On December 31st, most of us would like to be thinking about a prosperous new year ahead…drinking bubbly and singing Auld Lang Syne with friends.  But there's a chance we could be singing a different tune if President Obama and Congress don't agree on measures to avoid the fiscal cliff.
First, let me explain what the fiscal cliff is.
The fiscal cliff refers to the potentially disastrous situation the U-S faces at the end of this year.  At midnight on December 31st, a number of laws are set to expire.  If the President and the Republicans don't reach an agreement before then, Americans could face broad government spending cuts and tax increases on January 1st.   The combined amount would total over 500 billion dollars. Those 500 billion dollars equal about three to four percent of the nation's entire gross domestic product.  This is what's referred to as the fiscal cliff.
If there isn't a resolution, here are the specifics of what will happen.
Taxes would go up for almost every taxpayer and many businesses. The Bush-era tax cuts, which tax relief for middle and upper-class tax payers, would be a thing of the past.  So would President Obama's payroll tax cut which added about a thousand dollars a year to the average worker's income.
Government spending would be slashed.  That means less money for most military, domestic and federal programs.  $26 billion in emergency unemployment-compensation would be gone. Medicare payments to doctors would be reduced by $11 billion. Federal programs would take the biggest hit.  They stand to lose a total of $65 billion.
If the fiscal cliff isn't avoided, some investors will be hit hard.  Those who receive qualified dividends could see the tax rate on those dividends go from 15% to almost 40% in 2013.
Many business owners believe going over the fiscal cliff will cripple the economy, triggering a deep recession.  They fear demand for their products or services will decrease because consumers will have less money to spend.  It also means that they won't be able to afford new hires or expand their businesses.   Since most Americans would be paying more in taxes, they'd be less inclined to make big purchases, like a home or a new car.
None of this is set in stone, but that's part of the problem.  Markets, businesses and people in general hate uncertainty. The fear of the unknown facing us at the beginning of next year is exactly why so many people are so worked up over the fiscal cliff.
Did you learn something? Do you have a topic you'd like explained?  Give us your feedback in the comments below or on twitter using #justexplainit.

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Retailers report higher December sales

A last-minute surge in spending saved the holiday shopping season.
Major retailers including Costco, Gap and Nordstrom on Thursday reported better-than-expected revenue in December. That comes as a relief for stores, which can make up to 40 percent of their annual revenue in the last two months of the year.
Americans spent cautiously early in the season as the Northeast recovered from Superstorm Sandy. Then they held back because of fears that the U.S. economy would fall off the "fiscal cliff," triggering massive budget cuts and tax increases that would have amounted to less money in their pockets. But shoppers spent more freely in the final shopping days of the year.
Twenty retailers reported that revenue at stores open at least a year — an indicator of a store's health — rose an average of 4.5 percent in December compared with the same month a year ago, according to the International Council of Shopping Centers. That's on the high end of the expected range of 4 percent to 4.5 percent. Only a small group of stores that represent about 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue, but the data offers a snapshot of consumer spending.
"I wouldn't be doing cartwheels that it was a particularly great or strong holiday season, but it could have been worse given the headwinds," said Ken Perkins, president of RetailMetrics, a research firm. "The government and Mother Nature were not as cooperative as retailers would have liked. But it was definitely not as bad as feared."
December's results provide a brighter picture than reports last month that proclaimed that the holiday shopping season was shaping up to be the worst since 2008 when the U.S. was in a deep recession.
To be sure, the season had multiple fits and starts, with healthy spending during certain periods followed by stretches of tepid sales. Overall, revenue for the combined months of November and December rose 3.1 percent, roughly on par with the 3 percent rise that the ICSC had predicted.
Sales were weak at the beginning of November in the wake of Superstorm Sandy and the distraction of the U.S. presidential campaign, followed by a surge later in the month during the four-day Thanksgiving weekend. Spending fell off after that until a rush before and after Christmas when some stores began offering bigger discounts.
Nordstrom, for instance, had a particularly strong December, with revenue at stores open at least a year up 8.6 percent, more than double the 3.4 percent analysts expected. The Seattle-based department store operator said revenue was particularly strong in the last week of the season.
"That last-minute shopping, coupled with post-Christmas bargain hunting and early gift-card redemption, helped propel sales at the end of the month," said Michael P. Niemira, ICSC's chief economist.
Kelly Tenedini, 35, decided to pick up some "filler" gifts for her mom and her sister on the Sunday before Christmas at the Target in the Edgewood Retail District in Atlanta. Tenedini, who spent about $400 during the season, bought a sweater for her mom and gloves for her mother and sister that day.
Tenedini, who works in marketing, said the biggest deal she found was for herself: $50 off a pot and pan set on Target.com.
Manuel Gonzalez, 52, from Manhattan borough of New York City, spent about $150 on the Saturday before Christmas when he went to The Garden State Plaza in Paramus, N.J. He scooped up bargains, including 75 percent off Sketcher sneakers at Macy's.
For the season, he was planning to spend about $400 to $500 for gifts for his three boys, ages 5, 8 and 22 -- the same amount he spent a year ago.
Gonzales, who works at a bank, said he's glad he waited until later in the season to shop: "I am budgeting."
While the last-minute promotions may have drawn shoppers like Tenedini and Gonzalez, they also ate into stores' profits.
For instance, Kohl's said its December revenue at stores open at least a year increased 3.4 percent, beating Wall Street predictions. But the retailer said that the growth came from heavy discounts, and it cut its profit outlook for the current quarter and full year.
"Sales came late in the holiday shopping season and, as a result, were at deeper discounts than planned," said CEO Kevin Mansell. "We are taking the necessary markdowns in the fourth quarter to manage our inventory as we transition into the Spring season.

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GM could face $918 million hit from bankruptcy-related lawsuit

A U.S. bankruptcy judge could soon rule on whether the 2009 government-led restructuring of General Motors Co improperly favored hedge funds, and an adverse ruling could cost the automaker nearly $1 billion.
Judge Robert Gerber must decide whether a "lock-up agreement" in the restructuring sent $367 million to a group of hedge fund noteholders at the expense of other creditors.
A trust representing unsecured creditors has sued to undo the lock-up agreement, arguing that it was a last-minute deal secretly folded into GM's bankruptcy to ensure the hedge funds' support.
After the automaker, or "Old GM," filed for bankruptcy in 2009, its best assets were sold to the new General Motors Co . The remainder of the company was liquidated for the benefit of creditors.
While the hedge funds, which hold notes with about $1 billion in face value, received the $367 million under the lock-up agreement, unsecured creditors received just pennies on the dollar. The hedge funds and other investors in the notes also received a claim against "Old GM" for $2.67 billion.
In its lawsuit, which was filed in U.S. Bankruptcy Court in Manhattan, the creditors' trust alleged that the lock-up agreement was unfair to "Old GM" creditors. The trust said the deal took place after the bankruptcy filing and therefore required Gerber's approval, and it called on Gerber to unwind the deal.
GM and the hedge funds have argued the lock-up agreement was sealed before the bankruptcy and was not subject to Gerber's approval. They have also argued the agreement was not secret because it was disclosed in securities filings.
They also argued that the lock-up agreement cannot be unwound without undoing the entire restructuring.
At a court hearing in July, Gerber said he was "shocked" to learn about the hedge fund deal. "The bottom line is, is that this matter is huge," Gerber said. "There was a lack of disclosure to the court on the matter with the potential to injure 'Old GM' creditors to the extent of hundreds of millions, if not billions of dollars."
Gerber held several days of trial between August and October. The hedge funds and GM have asked Gerber to extend the trial for one more day to call a rebuttal witness, a request to which the judge has not responded publicly.
Although the judge has not said when he will rule on the lock-up agreement, experts say a ruling could come as early as this month.
A GM spokesman and Bruce Zirinsky, a Greenberg Traurig lawyer who represents the main hedge fund defendants, both said they expect to prevail but declined to comment further. A lawyer for the creditor trust, Eric Fisher of Dickstein Shapiro, did not respond to requests for comment.
The defendants are the hedge funds that signed the lock-up agreement, as well as others that invested in the notes along with the hedge funds. While GM is not a defendant, the automaker said in an earnings statement in August that the lawsuit could lead to a possible loss of as much as $918 million.
This is because GM could find itself on the hook for a loan of around $1 billion that was owed by GM Canada to a financing unit based in Nova Scotia that had issued notes to the hedge funds.
According to court papers, the lock-up agreement was negotiated with the involvement of Canada and the United States, which were funding the bankruptcy.
The two governments wanted to keep GM Canada out of that country's potentially complicated insolvency proceedings and agreed to pay the $367 million to the hedge funds to resolve GM Canada's debt to the Nova Scotia entity.
In addition to the payment, "Old GM" agreed not to contest claims against it by the noteholders with a face value of $2.67 billion.
Regardless of the outcome, Gerber said in July he expected his ruling to be appealed.
The case is Motors Liquidation Company GUC Trust v The Liverpool Limited Partnership et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-09802.

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Private sector job gains offer hope for labor market

WASHINGTON (Reuters) - Private-sector employers shrugged off a looming budget crisis and stepped up hiring in December, offering further evidence of underlying strength in the economy as 2012 ended.
While other data on Thursday showed an increase in the number of Americans filing new claims for unemployment benefits, the trend remained consistent with steady job growth.
"The underlying economy has momentum, and the employment data confirms that. The hope and prayer of the market is that our political leaders don't screw it up," said John Brady, managing director at R.J. O'Brien & Associates in Chicago.
Although Congress this week approved a deal to avoid the so-called fiscal cliff, a combination of sharp government spending cuts and higher taxes that would have sucked about $600 billion from the economy, the budget problems are far from resolved.
The ADP National Employment Report showed the private sector added 215,000 jobs last month after increasing payrolls by 148,000 in November. The report is jointly developed with Moody's Analytics.
The job gains came even as companies worried the economy might fall off the fiscal cliff.
However, the ADP data tends to overstate job gains in December because of a year-end accounting quirk.
"While we are encouraged by the better tone in the ADP employment report, we are cautious about reading too much into it, particularly given its tendency to exaggerate the performance of the labor market in December," said Millan Mulraine, a senior economist at TD Securities in New York.
Still, the report added to other data ranging from consumer spending to manufacturing that have suggested the economy was in a much better shape than previously thought.
It was released ahead of the government's more comprehensive employment report on Friday, which is expected to show employers added 150,000 jobs to their payrolls in December, according to a Reuters survey of economists, up from 146,000 in November.
STEADY JOB GAINS
A separate report from the Labor Department showed initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 372,000 last week. However, claims data for nine states, including California and Virginia, was estimated because of the Christmas and New Year holidays.
The four-week moving average for new claims, a better measure of job market trends, was little changed at 360,000, a sign labor conditions continue to improve at a steady pace.
"The claims data are not always reliable labor market indicators around the holiday season because of issues seasonally adjusting the data, but it is still a somewhat encouraging sign to see the trend in the data remain relatively low," said Daniel Silver, an economist at JPMorgan in New York.
Job gains in the first 11 months of last year averaged about 151,000 per month, not enough to significantly lower unemployment. The jobless rate dropped by 0.2 percentage point to 7.7 percent in November and is expected to have held at that level last month.
Labor market concerns prompted the Federal Reserve to aggressively ease monetary policy, but consensus is diminishing.
Minutes of the U.S. central bank's December 11-12 meeting released on Thursday showed some policymakers thought it would be prudent to slow or stop asset purchases well before the end of this year because of concerns about financial stability.
Stocks on Wall Street ended lower on the prospect of the Fed adopting a less accommodative stance. Prices for U.S. government debt fell, with the yield on the longer-dated 30-year bond touching its highest level since May.
The U.S. dollar rose against a basket of currencies.
The improving labor market tone was also captured by a third report showing planned layoffs at U.S. firms fell in December for the first time in four months, while the overall job-cut total in 2012 was the lowest since 1997.
"The key to job creation is the pace at which companies are willing to hire new workers since it appears they are already retaining existing employees at a high rate," said John Ryding, chief economist at RDQ Economics in New York.
Better job security is helping to support domestic demand. Auto sales rose 9.0 percent last month to a 1.36 million-unit annual rate last month.
Several major retailers reported better-than-expected sales in December. Sales at stores open at least a year rose 4.5 percent, beating analysts' estimates for 3.3 percent growth.

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US job market resilient despite budget fight

The U.S. job market showed resilience in three reports Thursday, suggesting it may be able to withstand a federal budget battle that threatens more economic uncertainty in coming months.
A survey showed private hiring increased last month, while layoffs declined and applications for unemployment benefits stayed near a four-year low. The data led some economists to raise their forecasts for December job growth one day before the government releases its closely watched employment report.
"The job market held firm in December despite the intensifying fiscal cliff negotiations," said Mark Zandi, chief economist at Moody's Analytics. "Businesses even became somewhat more aggressive in their hiring at year end."
The most encouraging sign came from payroll provider ADP. Its monthly employment survey showed businesses added 215,000 jobs last month, the most in 10 months and much higher than November's total of 148,000.
Economists tend to approach the ADP survey with some skepticism because it has diverged sharply at times from the government's job figures. The Labor Department releases its employment report Friday.
But some economists were also hopeful after seeing businesses were less inclined to cut jobs last month.
Outplacement firm Challenger, Gray & Christmas said that the number of announced job cuts fell 43 percent in December from November, and overall planned layoffs in 2012 fell to the lowest level since 1997.
The decline in layoffs coincided with a drop last month in the number of people who applied for unemployment benefits. The four-week average was little changed at 360,000 last week. That's only slightly above the previous week's 359,750, which was the lowest since March 2008.
Most economists expect the Labor Department report will show employers added about 150,000 jobs last month and the unemployment rate stayed at 7.7 percent.
Some economists saw potential for stronger gains after seeing Thursday's data.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank, raised his forecast for job growth in December to 190,000 jobs, up from 150,000.
Credit Suisse increased its forecast to 185,000, up from 165,000.
"Given that we have restraints, the labor market data do appear to be improving," said Dana Saporta, an economist at Credit Suisse.
Still, many economists remained cautious about where the job market is headed. While Congress and the White House reached a deal this week that removed the threat of tax increases to most Americans, they postponed the more difficult decisions on cutting spending. And the government must also increase its $16.4 trillion borrowing limit by late February or risk defaulting on its debt.
Congressional Republicans are pressing for deep spending cuts in return for any increase in the borrowing limit. President Barack Obama has repeatedly said wants the issues kept separate.
The economy has added about 150,000 jobs a month, on average, over the past two years. That's too few to rapidly lower the unemployment rate.
Hiring probably won't rise above the current 150,000 per month trend until after the borrowing limit is resolved, economists say.
A similar fight over raising the borrowing limit in 2011 was only settled at the last hour and nearly brought the nation to the brink of default.
"That's not an environment where you're likely to be taking risks," such as boosting hiring, said Nigel Gault, chief U.S. economist at IHS Global Insight.
Even with modest gains in hiring, the unemployment rate remains high. It fell to 7.7 percent in November from 7.9 percent in October. But that was mostly because many of the unemployed stopped looking for jobs. The government counts people as unemployed only if they are actively searching for work.
The number of people receiving jobless benefits fell to 5.4 million in the week ended Dec. 15, the latest data available. That's down about 70,000 from the previous week. The figure includes about 2.1 million people receiving emergency benefits paid for by the federal government. The White House and Congress agreed earlier this week to extend that program for another year.
There are signs the economy is improving. The once-battered housing market is recovering, which should lead to more construction jobs this year. Companies ordered more long-lasting manufactured goods in November, a sign they are investing more in equipment and software. And Americans spent more in November. Consumer spending drives nearly 70 percent of economic growth.

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50 million Android and iOS devices activated in last week of December alone

The latest numbers from analytics firm Flurry suggest that Android and iOS flourished in the last week of the 2012. The firm previously estimated that roughly 17.4 million Android and iOS devices were activated on Christmas Day, leading to an estimated 1.76 billion mobile application downloads and more than 50 million activations for the full week. The latest numbers represent the highest number of device activations and app downloads of any week in history, an increase from 20 million activations and 1.2 billion downloads during Christmas week in 2011. Flurry estimates that in 2013 the trend of one-billion app downloads per week will become more frequent and by next December, more than 2 billion apps will be downloaded in a single week.

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Apple reportedly considering Waze acquisition to help fix iOS Maps app

Less than a month after rumors of a potential TomTom acquisition swirled, Apple (AAPL) is now reportedly considering a buyout of social navigation startup Waze in an effort to improve its much-maligned Maps application. TechCrunch reported on Wednesday that “there are rumours flying around that Apple is sniffing around Waze with a view to a possible acquisition,” though the source of the rumors is unclear. A similar report was published by Israeli news site NewsGeek.
[More from BGR: ‘iPhone 5S’ to reportedly launch by June with multiple color options and two different display sizes]
Waze, which currently provides some data to Apple for use in its iOS Maps app, utilizes user-submitted data to enhance its free navigation service available for iOS, Android and other platforms. Waze CEO Noam Bardin has been vocal about the quality of Apple’s mapping solution in the past, having said previously that Apple chose some of its mapping partners poorly, resulting in “the lowest, weakest data set.”

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HTC rumored to debut flagship ‘M7′ smartphone at CES

HTC (2498) will reportedly unveil a new flagship smartphone code-named “M7″ at the Consumer Electronics Show next week. The rumor comes to us from XDA-Developers forum member “Football,” who reported accurate information about unreleased HTC devices in the past. The phone is believed to the be the successor to the One X and could be equipped with a 4.7-inch full HD 1920 x 1080-pixel display, a 1.7GHz quad-core Snapdragon processor, a 13-megapixel rear camera, LTE and HSPA+ connectivity, Beats Audio, 2GB of RAM, 32GB of internal memory and a 2,300 mAh battery. The M7 is also said to be HTC’s first smartphone to utilize on-screen navigation keys in place of traditional hardware buttons.
[More from BGR: ‘iPhone 5S’ to reportedly launch by June with multiple color options and two different display sizes]
The problem for HTC in the past has been the company’s ability to market its high-end devices to consumers. Despite class-leading features and hardware, HTC’s smartphone sales have stalled in the past year and the company has continued to lose market share. It will be interesting to see if it can turn things around in 2013.
[More from BGR: Microsoft lashes out at Google’s decision to spurn Windows Phone]
The Consumer Electronics Show is scheduled to take place from January 8th to January 11th in Las Vegas, Nevada.

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Microsoft acquires start-up id8: source

SAN FRANCISCO (Reuters) - Microsoft Corp bought start-up id8 Group R2 Studios Inc as it looks to expand further in technology focused on the home and entertainment, a person familiar with the situation said on Wednesday.
id8 Group R2 Studios was started in 2011 by Silicon Valley entrepreneur and investor Blake Krikorian. It recently launched a Google Android application to allow users to control home heating and lighting systems from smartphones.
Krikorian's Sling Media - which was sold to EchoStar Communications in 2007 - made the "Slingbox" for watching TV on computers.
Krikorian will join Microsoft with a small team, according to the Wall Street Journal, which reported the acquisition earlier on Wednesday. Microsoft also purchased some patents owned by the start-up related to controlling electronic devices, the newspaper added.
Krikorian and a Microsoft spokesman declined to comment.
Krikorian resigned from Amazon.com Inc's board in late December after about a year and a half as a director at the company, the Internet's largest retailer.

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2013′s first hot Kickstarter project: An Android-based gaming ‘console-on-a-stick’

We didn’t have to wait very long to discover what 2013′s first big Kickstarter project would be. Via Ars Technica, we give you the GameStick, an Android-based two-inch long stick that plugs directly into a controller and acts as a highly portable gaming console. The GameStick team says that their goal with the new mini-console was to create “a big screen games console that was so small you could pop it in your pocket… so you can take all your games with you to any TV you like.” As far as titles go, GameStick developers so far have “identified 200 [Android] titles that will be great to play on GameStick” and are also “working with our network of over 250 developers including great studios such as Madfinger, Hutch, Disney and others to bring you the best line-up.” The project is seeking $100,000 by February 1st and has already raised over $31,500 on its first day; in other words, gamers who invest in the GameStick should see a lot of exciting stretch goals announced over the next month. If fully funded, GameStick is slated to launch to the public by this April.

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Major banks close to big settlement on home loans

U.S. regulators are close to securing another multibillion-dollar settlement with the largest banks to resolve allegations that they unlawfully cut corners when foreclosing on delinquent borrowers, a source familiar with the talks said.
The settlement with five big banks would be part of a larger deal that the Office of the Comptroller of the Currency hopes will include 14 banks and total about $10 billion, the source said.
Such a settlement would address an outstanding issue that was left unsettled after the $25 billion deal that the banks reached in February with the Justice Department, housing authorities, and state attorneys general.
In 2011, the OCC had separately required the big banks to "look back" and compensate borrowers wrongfully foreclosed upon in 2009 and 2010. It appears that the case-by-case analysis is proving too cumbersome, and the banks are instead opting for a lump-sum settlement.
The top five mortgage lenders -- Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc -- may reach a deal in the coming days, the source said.
The largest banks would pay the majority of the $10 billion target. That money would be paid out to a group of borrowers foreclosed upon during the period of time covered by the review, said the source, who was not authorized to speak publicly.
The OCC and the banks are still negotiating how to calculate individual payouts, the source said, adding that regulators will give the banks credit for compensation they have already given borrowers as part of ongoing foreclosure reviews.
The New York Times first reported the pending deal.
"The Office of the Comptroller of the Currency is committed to ensuring the Independent Foreclosure Review proceeds efficiently and to ensuring harmed borrowers are compensated as quickly as possible," the OCC said in a statement.
Ally, Wells Fargo, JPMorgan, Bank of America and Citigroup declined to comment.

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Oil rises as 'cliff' consensus appears close

 Oil prices rose Monday as U.S. political leaders moved toward averting the "fiscal cliff" just hours before the deadline.
President Barack Obama said Monday afternoon that a deal to avert the cliff — a series of automatic tax increases and spending cuts set to take effect starting Tuesday — was in sight but not yet finalized.
Republicans and Democrats are still at an impasse over whether to put off across-the-board spending cuts and, if so, how to pay for that. There's a midnight deadline to reach a deal.
Benchmark U.S. crude rose $1.02 to finish at $91.82 per barrel in New York. Oil has wavered in recent weeks along with the ups and downs of the budget negotiations. The price of oil finished December up about 3 percent from the start of the month. It ranged from a low near $77 a barrel to high around $110 a barrel during the year.
Brent crude, used to price international varieties of oil, rose 49 cents to end at $111.11 a barrel.
The national average for gasoline was at $3.29 per gallon Monday, well under the average of nearly $3.40 a month ago but 2 cents higher than a year ago.
In other energy futures trading:
Natural gas fell 12 cents, or 3.4 percent, to finish at $3.35 per 1,000 cubic feet.
Wholesale gasoline rose 1 cent to $2.81 a gallon.
Heating oil was flat at $3.05 a gallon.

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Wall Street ends 2012 riding high on "cliff" deal optimism

 U.S. stocks closed out 2012 with their strongest day in more than a month, putting the S&P 500 up 13.4 percent for the year, as lawmakers in Washington closed in on a resolution to the "fiscal cliff" negotiations.
The S&P 500's gain for the year marks its best performance since 2009, as stocks navigated through debt crises in Europe and the United States that dominated the headlines. Still, with numerous issues involving budget talks unresolved, markets could still be open to a shock should the deal break down unexpectedly.
Fittingly, in the last session of the year, stocks bounced back and forth on the headlines out of Washington, as both President Barack Obama and Republican Senate leader Mitch McConnell issued statements indicating a deal to avert the cliff was close.
"The worst news could have been the president coming out and saying, 'We don't have a deal and we've giving up,' and he didn't say that," said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, based in Scottsdale, Arizona.
"My personal skepticism, I don't trust anything out of Washington until it is signed, sealed and delivered, and it is not signed, sealed and delivered."
While a deal on the cliff is not yet official, investors may be ready to take on more risk next year in hopes of a greater reward.
McConnell said an agreement had been reached with Democrats on all of the tax issues in the potential deal, removing a large hurdle in the talks. An agreement is needed in order to avert a combination of tax hikes and spending cuts that many believe could push the U.S. economy into recession.
A source familiar with the matter said an emerging deal, if adopted by Congress and President Barack Obama, would raise $600 billion in revenue over the next 10 years by increasing tax rates for individuals making more than $400,000 and households earning above $450,000 annually.
Despite the uncertainty, the market encountered only occasional bouts of volatility this year. For the first time since 2006, the CBOE Volatility Index or VIX <.vix>, the market's favored indicator of anxiety, did not surpass the 30 level, a threshold that usually signals heightened worry among investors.
"Given all the threats in 2012, the VIX was relatively tranquil," said Bill Luby, the author of the VIX and More blog in San Francisco, citing the crises in Spain and Greece, along with constant intervention from the Federal Reserve.
The Dow Jones industrial average <.dji> gained 166.03 points, or 1.28 percent, to end at 13,104.14. The Standard & Poor's 500 Index <.spx> gained 23.76 points, or 1.69 percent, to finish at 1,426.19. The Nasdaq Composite Index <.ixic> gained 59.20 points, or 2.00 percent, to close at 3,019.51.
Monday's gains enabled the S&P 500 to snap a five-day losing streak, its longest skid since September.
The S&P 500 closed out 2012 with a 13.4 percent gain for the year, compared with a flat performance in 2011. The Dow rose 7.3 percent in 2012 and the Nasdaq climbed 15.9 percent.
Financials <.gspf> were the strongest of the S&P's 10 industry sectors this year, gaining more than 26 percent, led by Bank of America , which more than doubled in 2012, and was the best performer of the Dow industrials.
Of the S&P's 10 sectors, only defensively oriented utilities <.gspu> ended the year lower, falling 2.9 percent.
Gains in Apple Inc , the most valuable U.S. company, helped lift the Nasdaq. The stock rose 4.4 percent to $532.17, lifting the S&P information technology sector index <.gspt> up 2.2 percent. For the year, Apple rose 31.4 percent, ending with a market value of about $501.4 billion.
Each of the Dow's 30 components finished the session in positive territory, led by a 3.2 percent climb in Caterpillar Inc to $89.58.
Volume was modest, with about 6.06 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly below the daily average of 6.42 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of 6 to 1, while on the Nasdaq, four stocks rose for every one that fell.

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Stocks shoot up as investors bet on 'cliff' deal

The stock market shot higher on Monday even as the "fiscal cliff" neared. By the time trading ended, Republicans and Democrats still hadn't reached a budget compromise — but investors were betting that they would.
It was a dramatic day on what turned out to be a strong year for stocks. The Standard & Poor's 500 index rose 13.4 percent for the year, after finishing flat in 2011. It was the index's best year since 2009, and it came despite overhanging problems like Europe's debt crisis and anemic U.S. growth, bringing U.S. indexes close to their highs reached before the 2008 financial crisis.
Including dividends, the gain for the S&P 500 was even higher — 16 percent.
The close Monday was a high note in what had been a choppy day for the market, as choppy as the "fiscal cliff" deal-making that has been yanking it around. It also marked a turnaround after five straight days of "cliff"-influenced losses. The Dow Jones industrial average and the Standard & Poor's 500 both climbed more than 1 percent. The Nasdaq composite index rose 2 percent.
Stocks fell at the opening of trading Monday and struggled for direction throughout the morning. The indecisiveness overlaid a day of dramatic budget negotiations in Washington, where lawmakers were trying to hammer out a new budget deal to avert the "fiscal cliff." That refers to automatic tax increases and government spending cuts that will kick in without a budget deal.
Stocks jerked higher at midday following reports that the bare outline of a deal to avoid the "cliff" had been knit together. The gains faded after President Barack Obama said in the early afternoon that a compromise was "within sight," but not finalized. Then, in the late afternoon, the indexes shot higher again. Congressional Republicans and the Democratic White House said they had agreed on some measures, but still had no final deal in hand.
At the close of trading, Dow Jones industrial average was up 166.03 points, finishing the year at 13,104.14. That's a gain of 7.3 percent for the year, its fourth straight year of gains.
The S&P 500 rose 23.76 to 1,426.19. The Nasdaq composite climbed 59.20 to 3,019.51. For the year the Nasdaq rose 15.9 percent.
With the "fiscal cliff" still closing in, investors' opinions about its potential impact varied, making its long-term effect on the market hard to guess.
Some investors are unruffled. They think that even if the U.S. does go over the "cliff," it would be more akin to the anti-climactic Y2K scare than a true Armageddon. The "cliff's" impact would be felt only gradually, they reason. For example, workers might get more taxes withheld from their first couple of paychecks in the new year, but it's not as if they'd have to pay all their higher taxes up front on Tuesday. And Congress could always retroactively repeal those higher taxes.
Others are more concerned. The higher taxes and lower government spending could take more than $600 billion out of the U.S. economy and send it back into recession. Investors would have no good read on the country's long-term policy for taxes and spending.
The psychological impact — the U.S. would essentially be broadcasting that its lawmakers can't compromise — would also hurt.
"We're having a fragile recovery, with the pain of 2008 still fresh on everybody's mind," said Joe Heider, principal at Rehmann Group outside Cleveland. "It's fear of the unknown. And fear is one of the greatest drivers of the financial markets."
Tim Speiss, partner in charge of the personal wealth advisers practice at EisnerAmper in New York, followed the "cliff" negotiations on Monday and wondered if the U.S. would get its debt rating cut again. The Standard & Poor's ratings agency cut its rating of the U.S. government amid similar negotiations in August 2011, when lawmakers were arguing over the government's borrowing limit. S&P said at the time that the "political brinksmanship" highlighted how "America's governance and policymaking (is) becoming less stable, less effective, and less predictable." Its rating cut sent the stock market into a tailspin.
The other major ratings agencies, Moody's and Fitch, have suggested that they might lower their ratings of the U.S. because of the "fiscal cliff."
"That is, unfortunately, the big story," Speiss said.
It's also one of the only stories. There's been little other news to trade on during the holiday season, giving the "fiscal cliff" drama outsized influence. No major companies are scheduled to report earnings this week. The most significant economic indicator scheduled for this week, the government's monthly jobs report, won't be released until Friday.
The yield on the benchmark 10-year Treasury note rose to 1.76 percent from 1.70 percent late Friday, a sign that investors were moving money into stocks.
Some of the best-performing stocks for the year were those that were making up for deep losses in 2011. Homebuilder PulteGroup nearly tripled after falling for five of the previous six years. Appliance maker Whirlpool and Bank of America more than doubled over the year, after falling by double-digit percentages in 2011.
Some of the worst performers of 2012 were Best Buy, Hewlett-Packard and J.C. Penney. All are struggling to keep up with competitors who have adapted more quickly to changing technologies and customer tastes. They were all up for the day, but were all down at least 44 percent for the year.

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Minimum wage gap grows wider between states

With a bump in the Washington state minimum wage to $9.19 an hour, high school student Miranda Olson will edge closer to her goal of buying the black Volkswagen Beetle she's been researching online.
Olson is only able to pick up part-time hours working at a cafe after classes and on weekends. But the extra pennies she'll earn in 2013 will add up over the coming weeks and months.
"It's not much, but it's something," said Olson, 16, who works at Wagner's European Bakery and Cafe in Olympia. "Every bit helps."
Many workers around the country won't be as lucky as residents of Washington state, which is raising its minimum wage Tuesday by 15 cents an hour even though it already has the highest state baseline in the country.
Minimum-wage workers in Idaho will make nearly $2 an hour less in 2013 than their counterparts living just one state to the west.
Automatic increases designed to compensate for inflation have steadily pushed up wages in some states, even through the recession, expanding the pay gap between areas that make annual adjustments and those that don't. Of the 10 states that will increase the minimum wage Tuesday, nine did so automatically to adjust for inflation.
Rhode Island lawmakers approved that state's wage increase in the past year.
Paul Sonn, legal co-director at the National Employment Law Project, said he hopes more states will start looking at automatic adjustments as the economy recovers. He said the model — which Washington state adopted in 1998 — helps avoid sudden jolts as states try to catch up with each other.
"We think there's a case that it's better for everyone, including the business community, to have predictable, regular, small increases every year," Sonn said.
The automatic adjustments aren't much. Washington's bump will mean those who work 40-hour weeks will earn an extra $6 a week — enough for a couple lattes — or about $300 a year.
Hundreds of thousands of workers are expected to get a pay increase with the wage adjustments that begin New Year's Day. Along with Washington and Rhode Island, the changes will occur in Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon and Vermont.
Among the nine states with automatic adjustments, the average minimum wage is $8.12 an hour, up from a little under $8. States that do not have automatic changes operate with an average minimum wage of about $7.40 — a difference of about $1,500 a year for a full-time worker.
Many states, including Idaho, follow the federal minimum wage of $7.25 an hour, either because they've tied their minimum wage to that threshold or because the state-enacted minimum is lower than that.
San Francisco has set the highest local minimum wage and will have workers paid at least $10.55 an hour in 2013.
Groups such as the National Restaurant Association oppose further increases in federal or state minimum wages, arguing that it's an ineffective way to reduce poverty and forces business owners to cut hours, raise prices or lay off workers.
At Tom's 1st Avenue Bento, a downtown Portland lunch spot, owner Tom Hume said he boosted pay for minimum-wage workers before the end of the year in order to get ahead of the game. He also raised prices on one-third of his menu items by 25 cents.
Natasha Baker, 22, who works at Hume's restaurant in Portland, recently moved back in with her mother but hopes to move to another apartment in January. She said the extra $5 or $6 she's earning every week with the salary boost is OK but won't make a huge difference.
"I don't usually look at what I get paid," she said. "I'm more directed on what's being taken out, which is more discouraging than anything."
In Montpelier, Vt., restaurant owner Irene Facciolo said she supported the 14-cents-an-hour increase in the minimum wage for her employees. She said the move from $8.46 to $8.60 an hour wasn't much.
"We don't have a problem with it at all," Facciolo said.

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