Tech shares, optimism on "cliff" propel Wall Street higher

NEW YORK (Reuters) - Technology shares led a 1 percent rise in major stock indexes on Tuesday, pushing the S&P 500 to its best levels since mid-October and erasing all of the post-election selloff.

The Nasdaq was lifted by a 3 percent gain in Apple Inc's stock to $545.37. The company's shares had dropped last week as investors took profits before a possible tax rise next year. Coming into Tuesday's trading, Apple shares had lost 25 percent from an all-time intraday high hit in September.

Other large tech stocks also rallied. Texas Instruments gained 3.5 percent to $30.88 after bumping up its profit target late Monday. That helped other chipmakers rally, with the PHLX Semiconductor index <.sox> up 1.9 percent.

"I see a lot of buying in tech, and that's taking the whole market up with it," said Tom Donino, co-head of trading at First New York Securities in New York.

The Dow Jones industrial average <.dji> rose 126.66 points, or 0.96 percent, at 13,296.54. The Standard & Poor's 500 Index <.spx> was up 14.55 points, or 1.03 percent, at 1,433.10. The Nasdaq Composite Index <.ixic> gained 44.40 points, or 1.49 percent, at 3,031.37.

Traders voiced cautious optimism as the pace of negotiations over the "fiscal cliff" quickened. However, representatives from both parties cautioned that an agreement remains uncertain.

"I guess in our own dysfunctional way, there is progress," said Frank Davis, director of sales and trading at LEK Securities in New York.

"Since conversations are occurring, it clarifies at least they are taking some action. My personal gut is they'll jostle this into the holiday week and try to do a last minute push."

Lawmakers worked toward a deal to avoid a series of automatic tax hikes and spending cuts that would hurt U.S. economic growth next year.

The lack of demonstrable progress has kept investors from making aggressive bets in recent weeks.

But stocks have steadily marched higher on thin volume. The S&P 500 surpassed 1433.38 on Tuesday, retracing losses in the first seven sessions after President Barack Obama's re-election.

A positive report from Goldman Sachs Equity Research pushed up shares in some retailers. Luggage maker Tumi Holding Inc. was up 4.8 percent to $21.94 and Michael Kors Holding gained 4 percent to $51.76.

The U.S. Treasury is selling its remaining stake in insurer American International Group Inc . AIG's shares were up 4.1 percent at $34.74.

Unexpected improvement in data out of Europe set the positive tone early. In Germany, analyst and investor sentiment rose sharply in December, entering positive territory for the first time since May, a leading survey showed.

The Fed began a policy-setting meeting on Tuesday. The central bank is expected to announce a new round of Treasury bond purchases when the meeting ends on Wednesday to replace its "Operation Twist" stimulus which expires at the end of the year.

(Editing by Kenneth Barry)

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U.S. Designates Syrian Al Nusra Front as Terrorist Group

Manu Brabo/Associated Press

Syrian Army defectors were detained by Syrian rebel fighters while their identities were investigated Monday in the village of Azaz, near the Turkish border.

WASHINGTON — The United States has formally designated the Al Nusra Front, the militant Syrian rebel group, as a foreign terrorist organization.

The move, which was expected, is aimed at building Western support for the rebellion against the government of President Bashar al-Assad by quelling fears that money and arms meant for the rebels would flow to a jihadi group.

The designation was disclosed on Monday in the Federal Register, just before an important diplomatic meeting Wednesday in Morocco on the political transition if Mr. Assad is driven from power. The notice in the register lists the Al Nusra front as one of the “aliases” of Al Qaeda in Iraq.

In practical terms, the designation makes it illegal for Americans to have financial dealings with the group. It is intended to prompt similar sanctions by other nations, and to address concerns about a group that could further destabilize Syria and harm Western interests.

France, Britain, Turkey and the Gulf Cooperation Council have formally recognized the Syrian opposition. European Union foreign ministers met Monday with the head of the Syrian opposition coalition, Ahmed Mouaz al-Khatib, in Brussels.

British Foreign Secretary William Hague said that he hoped the European Union would soon grant the group full recognition.

The Al Nusra Front comprises only a small minority of the Syrian rebels, but it includes some of the rebellion’s most battle-hardened and effective fighters.

“Extremist groups like Jabhat al-Nusra are a problem, an obstacle to finding the political solution that Syria’s going to need,” the American ambassador to Syria, Robert Ford, said last week in an appearance hosted by the Foundation for the Defense of Democracies, a nongovernmental group.

But a growing number of anti-government groups — including fighters in the loose-knit Free Syrian Army that the United States is trying to bolster — have signed petitions or posted statements online in recent days expressing support for the Nusra Front. In keeping with a tradition throughout the uprising of choosing themes for Friday protests, the biggest day for demonstrations because it coincides with Friday Prayer, many called for this Friday’s title to be “No to American intervention — we are all Jabhet al-Nusra.”

Many Syrian fighters consider the Nusra Front a key ally because of its fighters’ bravery and reliable supply of money and arms. It has never come under the banner of the Free Syrian Army, shunning the Western aid and input that other groups have sought, but it coordinates closely with many who do.

Adding to the complication is that some groups in the Free Syrian Army have similar ideologies, follow the strict Salafist interpretation of Islam, and count among them fighters who joined the insurgency in Iraq — though they are not known to share the Nusra Front’s direct organizational connections to Al Qaeda in Iraq.

The Nusra Front celebrated another apparent battlefield achievement on Monday, declaring it had captured part of a large base outside the commercial hub of Aleppo. Activist groups and video posted online said that it had fought alongside other Islamic battalions including the Mujahedeen Shura Council and the Muhajireen Group.

The Syrian Observatory for Human Rights, a British-based group that tracks events in Syria through a network of activists in the country, said that the rebels had taken control of the command center of the sprawling base and that many soldiers had fled. Videos showed gunmen taking possession of tanks and anti-aircraft weapons.

The decision to designate the group, the register noted, was made by Secretary of State Hillary Rodham Clinton on Nov. 20, in consultation with Attorney General Eric H. Holder Jr., and Treasury Secretary Timothy F. Geithner.

The State Department appeared to delay the publication of the decision to synchronize it with the expected announcement in Morocco that the United States will formally recognize the Syrian opposition. The United States closed its embassy in Damascus in February because of escalating violence in the capital.

Because Mrs. Clinton is not feeling well, she will not travel to North Africa and the Middle East this week as planned. Deputy Secretary of State William J. Burns will lead the United States delegation at the Morocco meeting, an aide to Mrs. Clinton said Monday.

Michael R. Gordon reported from Washington and Anne Barnard from Beirut, Lebanon.

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Miley Cyrus's Latest Look Will Definitely Shock You

Stylewatch
Style News Now

12/10/2012 at 11:30 AM ET

Michael Tran/FilmMagic

We’ve seen a lot of out-there ensembles on Miley Cyrus recently — denim jumpsuits, bra tops, visible lingerie — but the outfit she wore in Hollywood on Saturday night definitely trumped them all.

Performing with DJ/producer Borgore at Christmas Creampies concert at the Fonda Theatre, Cyrus opted for high-waisted pants and knee-high snakeskin boots, a peekaboo bra top and lots of gold accessories. She finished the look with an even shorter version of her bright blonde ‘do, which she originally debuted over the summer.

Cyrus’s style has evolved somewhat this year; she started 2012 in full-on glamour mode, looking grown-up and gorgeous at the Oscars. As time went on, she got a bit more revealing, showing some skin on the red carpet at The Hunger Games premiere and more famously, the Billboard Music Awards.

But once she got her haircut, Cyrus went retro, often opting for ’90s-inspired cut-off shorts, combat boots and crop tops. So after seeing Saturday’s outfit, we’re definitely interested to find out where Cyrus takes her sense of style next. Tell us: Are you into Miley’s outfit? Or is it too much? 

WEIGH IN ON INTERESTING STAR STYLES IN ‘OBSESSED OR HOT MESS?’

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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Wall Street gains on McDonald's and tech stocks

NEW YORK (Reuters) - Stocks rose on Monday, aided by gains in McDonald's and technology stocks, but moves remained muted as investors looked for any signs of movement on the "fiscal cliff" front.

Developments in Europe also served to keep sentiment in check as Italian Prime Minister Mario Monti said he would resign once the 2013 budget is approved. The move added to uncertainty about progress being made to tackle the euro zone's debt problem and drove Italy's borrowing costs higher.

U.S. President Barack Obama met with Republican House Speaker John Boehner on Sunday to negotiate a deal for avoiding the "fiscal cliff" set to go into effect in the new year.

The two sides declined to provide details about the unannounced meeting. Obama is expected to make remarks at 2 p.m. (1900 GMT) from Michigan where he is touring an auto plant.

The fiscal cliff talks have kept markets on edge in the last month as investors worry that the scheduled tax hikes and budget cuts could send the U.S. economy into recession if politicians do not reach a deal.

But the heightened rhetoric and lack of substantial progress has also handcuffed the equities market. The benchmark S&P 500 index has yet to see a move greater than 0.5 percent in either direction for December, and hasn't moved more than 1 percent either way since November 23.

"What we have been seeing is any headline that emanates from anywhere in the world will drive the market pretty quickly one way or the other," said Keith Bliss, senior vice-president at Cuttone & Co, in New York.

"People are out of the market if they have already got their gains (for the year) and the other thing is anybody that is in the market is just kind of sitting around waiting."

The Dow got its biggest lift from McDonald's Corp , up 1.2 percent at $89.55. The fast-food chain's stronger-than-expected November sales marked a rebound after a decline in October.

The Dow Jones industrial average <.dji> gained 34.89 points, or 0.27 percent, to 13,190.02. The Standard & Poor's 500 Index <.spx> added 2.78 points, or 0.20 percent, to 1,420.85. The Nasdaq Composite Index <.ixic> advanced 12.79 points, or 0.43 percent, to 2,990.83.

Technology stocks were the S&P 500's best-performing sector, helped by a 3.6 percent climb in Hewlett-Packard Co to $14.30 on rumors that activist investor Carl Icahn is building a stake in the PC maker. The stock is down 44.5 percent for the year and ranks as the Dow's worst performer.

Cisco Systems also buoyed tech stocks. Cisco's shares rose 2 percent to $19.71 after the company, known for its Internet routers and switches, laid out its midterm growth strategy on Friday. Monday's rally put the stock on track for its fifth advance in the past six sessions.

Ingersoll-Rand Plc edged up 0.1 percent to $48.76 after the company said it will spin off its security division and announced a $2 billion share buyback.

(Editing by Jan Paschal)

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Damascus Is Tested as Clashes Draw Near

Muzaffar Salman/Reuters

A member of Syria's symphony orchestra ahead of a concert in Damascus in November.

DAMASCUS, Syria — Business has been terrible for Abu Tareq, a taxi driver, so last week, without telling his wife, he agreed to drive a man to the Damascus airport for 10 times the usual rate. But, he said later, he will not be doing that again.

On the airport road, he could hear the crash of artillery and the whiz of sniper fire. Dead rebels and soldiers lay on the roadsides. Abu Tareq saw a dog eating the body of a soldier.

“I will never forget this sight,” said Abu Tareq, 50, who gave only a nickname for safety reasons. “It is the road of the dead.”

Damascus, Syria’s capital, is one of the world’s oldest continuously inhabited cities, a touchstone of history and culture.

Through decades of political repression, the city preserved, at least on the surface, an atmosphere of tranquillity, from its wide downtown avenues to the spacious, smooth-stoned courtyard of the Umayyad Mosque and the vine-draped alleys of the Old City, where restaurants and bars tucked between the storehouses of medieval merchants hummed with quiet conversation.

Now, though, the rumble of distant artillery echoes through the city, and its residents are afraid to leave their neighborhoods. Cocooned behind rows of concrete blocks that close off routes to the center, they huddle in fear of a prolonged battle that could bring destruction and division to a place where secular and religious Syrians from many sects — Sunni, Shiite, Alawite, Christian and others — have long lived peacefully.

For more than a week, Syrian rebels and government forces have fought for the airport road, as the military tries to seal off the capital city, the core of President Bashar al-Assad’s power, from a semicircle of rebellious suburbs. Rebels have now kept the pressure on the government for as long as they did during their previous big push toward Damascus last summer. This time, improved supply lines and tactics, some rebels and observers say, may provide a more secure foothold.

But the security forces wield overwhelming firepower, and while they have been unable to subdue the suburbs, some rebel fighters say they lack the intelligence information, arms and communication to advance. That raises the specter of a destructive standoff like the one that has devastated the commercial hub of Aleppo.

“Damascus was the city of jasmine,” Mahmoud, 40, a public-school teacher, said in an interview in the capital. “It is not the city I knew just a few weeks ago.”

Car bombs have ripped through neighborhoods, the targets and attackers only guessed at. Checkpoints choke traffic, turning 20-minute jaunts into three-hour ordeals. Wealthy residents find it quicker and safer to drive to Beirut, Lebanon, for a weekend trip than to the Old City.

Shells have been fired from Mount Qasioun overlooking Damascus, a favorite destination from which to admire the city’s sparkling lights. West of downtown, where the presidential palace stands on a plateau, things are relatively quiet.

Mahmoud, unable to find heating oil and medicine for his sick wife, said his grocer has lectured him daily on shortages and soaring prices. The once-ubiquitous government, he said, now appears to have no role beyond flooding streets with soldiers and security officers, “who are sometimes good and sometimes rude.”

People with roots in other towns have left, he said, “but what about me, who is a Damascene, and has no other city?”

The sense of claustrophobia has grown as rebels have declared the airport a legitimate target and the government has blocked Baghdad Street, a main avenue out of the city. On Sunday, it blocked the highway to Dara’a.

In some outlying neighborhoods and nearby suburbs, the front lines seem to be hardening.

On the route into Qaboun, a neighborhood less than two miles from the center of Damascus, the last government checkpoint in recent days was near the municipal building. Less than a quarter-mile on, rebels controlled the area around the Grand Mosque.

An employee of The New York Times reported from Damascus, and Anne Barnard from Beirut, Lebanon. Neil MacFarquhar contributed reporting from Beirut.

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RIM teases BlackBerry 10 launch with image of first BB10 smartphone

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Kate Middleton & Anderson Cooper Get Love and Inspire Awe from Readers

By Julia Haskins

12/09/2012 at 01:00 PM EST

Prince William and Kate; Anderson Cooper

Splash News Online

We love hearing your passionate responses to PEOPLE.com news through article emoticomments and readers didn't disappoint this week.

You loved Kate's pregnancy news, were wowed by Anderson Cooper's bout with blindness and were disheartened by the tragic murder-suicide of Kansas City Chiefs linebacker Jovan Belcher.

Keep sounding off by clicking at the bottom of every article, and let us know what makes you happy, sad, or just plain laugh out loud.

You were filled with love for the Duchess of Cambridge, who is carrying a new royal. You also adored attentive dad-to-be Prince William, who was at Kate's side while she was being treated for severe morning sickness.

You were devastated to hear about Kansas City Chiefs player Jovan Belcher, who killed his girlfriend, Kasandra M. Perkins, and then shot and killed himself in front of his coach and general manager. The couple had a 3-month-old daughter.

Ouch! Anderson Cooper's painful temporary blindness after burning his retinas while on assignment had you saying, "Wow!" His mishap comes with a lesson, though: Don't forget to wear your sunglasses.

Demi Moore made you giggle again this week, but this time it was because of her dance moves. "Demi was wild and crazy and having the time of her life" at a party at Alex Rodriguez's Miami home, a source told PEOPLE. Moore is in town for Art Basel where the scene is buzzing about whether she is or isn't dating 26-year old art dealer Vito Schnabel.

You weren't as happy as Peter Facinelli about his budding romance with Nurse Jackie costar Jaimie Alexander. Facinelli's split with Jennie Garth might be on your minds. But rest assured, even though the split hasn't been easy, Garth herself says she's "happy that he is happy."

Check back next week for another must-read roundup, and see what readers are reacting to every day here.

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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Wall St Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in the past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

This week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. EST on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, on Friday registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

If tax rates are going up, an investor would sell now to book gains and pay lower capital gains taxes, according to Aama. But if an investor has capital losses, then "you take losses and have them count against capital gains or regular income if you do not have any offsetting capital gains.

"In essence, higher capital gains tax rates will give your losses a higher value next year than this year as the income tax shield will be worth more in 2013. So if you have no capital gains this year, you are better off holding off on selling your losers in 2012 and waiting till 2013," he said in an email.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Even with stocks' recent declines, the three major U.S. stock indexes are still up for the year. The Dow Jones industrial average <.dji> is up 7.7 percent for 2012 so far, while the benchmark Standard & Poor's 500 index <.spx> is up 12.8 percent and the Nasdaq Composite Index <.ixic> is up 14.3 percent for the year to date.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there is a decent chance that the market could rally before the year ends.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Sunday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on <.l>; Pan-European stock market outlook <.eu>; Tokyo stock market outlook <.t>)

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