"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.

(Reporting By Caroline Valetkevitch; Editing by Kenneth Barry)

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IHT Rendezvous: Hints of Taiwan Leading the Way on Same-Sex Marriage in Asia

BEIJING — Will Taiwan become the first place in Asia to legalize same-sex marriage in 2013?

Perhaps, judging from recent developments on the island, where the legislature has held its first hearings on the issue, a move that signifies “a major step towards becoming the first Asian territory to approve marriage equality,” the Shanghai-based Web site Shanghaiist reported, citing Gay Star News.

In another sign that change may be on the way for Taiwan, senior judges recently asked for advice from the country’s constitutional court, the Grand Justices, on whether to legalize same-sex marriages after two men from Taiwan, Nelson Chan and his long-term partner, Kao Chih-wei, filed an administrative lawsuit last year following the rejection by a local registration office in Taipei of their application to marry.

As The Taipei Times reported late last month, the Taipei High Administrative Court had been expected to hand down a decision on Mr. Chen and Mr. Kao’s case, “but instead said it was seeking a constitutional interpretation while holding further debates before making a judgment.”

To Mr. Chen, that was a victory. “I think this is a good decision. I’m happy to see it,” he told The Taipei Times. “I am confident and hopeful of the outcome of the constitutional interpretation, because the world is changing. I hope Taiwan would be the first Asian country to recognize same-sex marriages through a judicial ruling.”

The moves come as more states in the United States have legalized gay marriage – Maine and Maryland becoming the latest, with Maryland’s new law taking effect Jan. 1. Same-sex marriage is now legal in nine states and Washington, D.C.

One of the most socially and politically progressive societies in Asia, “Taiwan is moving closer to allowing same-sex marriage,” predicted Gay Star News, though it pointed out that top judges in Taiwan had said that the proposed changes did not go far enough and that legislation needed to be rewritten and expanded before that could happen – and that it would not be a simple matter.

Current proposals for change affect only the articles of the Civil Code that pertain to marriage in gendered language, and propose “altering the words from ‘male’ and ‘female’ to gender-neutral language,” Gay Star News reported.

It quoted a senior judge, Hsu Li-ying, from the Supreme Court’s Juvenile and Family Department (the court is known in Taiwan’s complex political-legal system as the Judicial Yuan) as saying that the new legislation might “need to be more comprehensive.”

The deputy justice minister, Chen Ming-tang, said it was not just the Civil Code that would have to change, but also laws regarding parentage, taxes and health insurance. That means the Justice Ministry could not do it alone, the report said.

Others believed the road ahead will be long and same-sex marriage difficult to achieve, with the decision to seek advice from the constitutional court a way of avoiding making a decision.

Taiwan has a flourishing civil society and a gay community that has long been pressuring the government to legalize gay marriage. Many believe it is a matter of time. Taiwan hosts Asia’s biggest gay pride parade, with the one held last October drawing more than 50,000 participants from across the region.

Taiwan even has its own gay god – the Taoist Rabbit God, to whom homosexuals can pray for love and good fortune (there is a small temple to the Rabbit God near Taipei). As The Taipei Times reports, the rabbit deity is based on the real-life figure of Hu Tianbao, an official in 18th-century Qing dynasty China.

And last year, two women in Taiwan were “married” in a Buddhist ceremony by a Buddhist master, Shih Chao-hwei, who is also a professor at Hsuan Chuang University. Homosexuality is not prohibited in Buddhism, the professor said: “It’s difficult enough to maintain a relationship,” the professor said in a telephone interview with The Taipei Times. “How could you be so stingy as to begrudge a couple for wanting to get married, regardless of their sexual orientation?”

A poll in September by The United Daily News found that 55 percent of those surveyed approved of gay marriage laws, with only 37 percent against. But the poll also found that 61 percent could not accept their children being gay, with only 37 percent saying they could.

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Hero Lawyer Gives His House to a Homeless Family for a Year

01/05/2013 at 12:00 PM EST

Felicia Dukes and her four children had been living in a homeless shelter – but now they have a cozy house all their own – thanks to a Los Angeles lawyer who has temporarily given up his residence to the family in need.

Tony Tolbert, 51, decided he wanted to give up his fully furnished home, rent-free for one year, to a struggling family. So he sought out Alexandria House, a homeless shelter for women and children, where he was connected with Dukes.

"You don't have to be Bill Gates or Warren Buffet or Oprah," Tolbert, who has moved back into his parents' house for the year, told CBS News. "We can do it wherever we are, with whatever we have, and for me, I have a home that I can make available."

Dukes, who was joined by her three daughters and son, tearfully tells CBS, "My heart just fills up and stuff … I'm just really happy."

Tolbert says his generous spirit comes from his father, an L.A. entertainment lawyer, who taught his son about the virtues of giving when he was growing up. Tolbert says his dad regularly lent out the family's spare bedroom to someone in need.

"Kindness creates kindness; generosity creates generosity; love creates love," Tolbert said, while emotionally addressing his dad, who has Alzheimer's disease. "I think if we can share some of that and have more stories about people doing nice things for other people, and fewer stories about people doing horrible things to other people, that's a better world."

Tolbert's ways are nothing new, according to his mom Marie, who says, "He's so giving, and he's always been that way."

Know a hero? Send suggestions to heroesamongus@peoplemag.com. For more inspiring stories, read the latest issue of PEOPLE.

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FDA: New rules will make food safer

WASHINGTON (AP) — The Food and Drug Administration says its new guidelines would make the food Americans eat safer and help prevent the kinds of foodborne disease outbreaks that sicken or kill thousands of consumers each year.

The rules, the most sweeping food safety guidelines in decades, would require farmers to take new precautions against contamination, to include making sure workers' hands are washed, irrigation water is clean, and that animals stay out of fields. Food manufacturers will have to submit food safety plans to the government to show they are keeping their operations clean.

The long-overdue regulations could cost businesses close to half a billion dollars a year to implement, but are expected to reduce the estimated 3,000 deaths a year from foodborne illness. The new guidelines were announced Friday.

Just since last summer, outbreaks of listeria in cheese and salmonella in peanut butter, mangoes and cantaloupe have been linked to more than 400 illnesses and as many as seven deaths, according to the federal Centers for Disease Control and Prevention. The actual number of those sickened is likely much higher.

Many responsible food companies and farmers are already following the steps that the FDA would now require them to take. But officials say the requirements could have saved lives and prevented illnesses in several of the large-scale outbreaks that have hit the country in recent years.

In a 2011 outbreak of listeria in cantaloupe that claimed 33 lives, for example, FDA inspectors found pools of dirty water on the floor and old, dirty processing equipment at Jensen Farms in Colorado where the cantaloupes were grown. In a peanut butter outbreak this year linked to 42 salmonella illnesses, inspectors found samples of salmonella throughout Sunland Inc.'s peanut processing plant in New Mexico and multiple obvious safety problems, such as birds flying over uncovered trailers of peanuts and employees not washing their hands.

Under the new rules, companies would have to lay out plans for preventing those sorts of problems, monitor their own progress and explain to the FDA how they would correct them.

"The rules go very directly to preventing the types of outbreaks we have seen," said Michael Taylor, FDA's deputy commissioner for foods.

The FDA estimates the new rules could prevent almost 2 million illnesses annually, but it could be several years before the rules are actually preventing outbreaks. Taylor said it could take the agency another year to craft the rules after a four-month comment period, and farms would have at least two years to comply — meaning the farm rules are at least three years away from taking effect. Smaller farms would have even longer to comply.

The new rules, which come exactly two years to the day President Barack Obama's signed food safety legislation passed by Congress, were already delayed. The 2011 law required the agency to propose a first installment of the rules a year ago, but the Obama administration held them until after the election. Food safety advocates sued the administration to win their release.

The produce rule would mark the first time the FDA has had real authority to regulate food on farms. In an effort to stave off protests from farmers, the farm rules are tailored to apply only to certain fruits and vegetables that pose the greatest risk, like berries, melons, leafy greens and other foods that are usually eaten raw. A farm that produces green beans that will be canned and cooked, for example, would not be regulated.

Such flexibility, along with the growing realization that outbreaks are bad for business, has brought the produce industry and much of the rest of the food industry on board as Congress and FDA has worked to make food safer.

In a statement Friday, Pamela Bailey, president of the Grocery Manufacturers Association, which represents the country's biggest food companies, said the food safety law "can serve as a role model for what can be achieved when the private and public sectors work together to achieve a common goal."

The new rules could cost large farms $30,000 a year, according to the FDA. The agency did not break down the costs for individual processing plants, but said the rules could cost manufacturers up to $475 million annually.

FDA Commissioner Margaret Hamburg said the success of the rules will also depend on how much money Congress gives the chronically underfunded agency to put them in place. "Resources remain an ongoing concern," she said.

The farm and manufacturing rules are only one part of the food safety law. The bill also authorized more surprise inspections by the FDA and gave the agency additional powers to shut down food facilities. In addition, the law required stricter standards on imported foods. The agency said it will soon propose other overdue rules to ensure that importers verify overseas food is safe and to improve food safety audits overseas.

Food safety advocates frustrated over the last year as the rules stalled praised the proposed action.

"The new law should transform the FDA from an agency that tracks down outbreaks after the fact, to an agency focused on preventing food contamination in the first place," said Caroline Smith DeWaal of the Center for Science in the Public Interest.

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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.

(Reporting By Caroline Valetkevitch; Editing by Kenneth Barry)

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India Takes Aim at Poverty With Cash Transfer Program

Manish Swarup/Associated Press

Poor and homeless people waited for food on Tuesday at a New Delhi temple.

NEW DELHI — India has more poor people than any nation on earth, but many of its antipoverty programs end up feeding the rich more than the needy. A new program hopes to change that.

On Jan. 1, India eliminated a raft of bureaucratic middlemen by depositing government pension and scholarship payments directly into the bank accounts of about 245,000 people in 20 of the nation’s hundreds of districts, in a bid to prevent corrupt state and local officials from diverting much of the money to their own pockets. Hundreds of thousands more people will be added to the program in the coming months.

In a country of 1.2 billion, the numbers so far are modest, but some officials and economists see the start of direct payments as revolutionary — a program intended not only to curb corruption but also to serve as a vehicle for lifting countless millions out of poverty altogether.

The nation’s finance minister, Palaniappan Chidambaram, described the cash transfer program to Indian news media as a “pioneering and pathbreaking reform” that is a “game changer for governance.” He acknowledged that the initial rollout had been modest because of “practical difficulties, some quite unforeseen.” He promised that those problems would be resolved before the end of 2013, when the program is to be extended in phases to other parts of the country.

Some critics, however, said the program was intended more to buy votes among the poor than to overcome poverty. And some said that in a country where hundreds of millions have no access to banks, never mind personal bank accounts, direct electronic money transfers are only one aspect of a much broader effort necessary to build a real safety net for India’s vast population.

“An impression has been created that the government is about to launch an ambitious scheme of direct cash transfers to poor families,” Jean Drèze, an honorary professor at the Delhi School of Economics, wrote in an e-mail. “This is quite misleading. What the government is actually planning is an experiment to change the modalities of existing transfers — nothing more, nothing less.”

The program is based on models in Mexico and Brazil in which poor families receive stipends in exchange for meeting certain social goals, like keeping their children in school or getting regular medical checkups. International aid organizations have praised these efforts in several places; in Brazil alone, nearly 50 million people participate.

But one of India’s biggest hurdles is simply figuring out how to distinguish its 1.2 billion citizens. The country is now in the midst of another ambitious project to undertake retinal and fingerprint scans in every village and city in the hope of giving hundreds of millions who have no official identification a card with a 12-digit number that would, among other things, give them access to the modern financial world. After three years of operation, the program has issued unique numbers to 220 million people.

Bindu Ananth, the president of IFMR Trust, a financial charity, said that getting people bank accounts can be surprisingly beneficial because the poor often pay stiff fees to cash checks or get small loans, fees that are substantially reduced for account holders.

“I think this is one of the biggest things to happen to India’s financial system in a decade,” Ms. Ananth said.

Only about a third of Indian households have bank accounts. Getting a significant portion of the remaining households included in the nation’s financial system will take an enormous amount of additional effort and expense, at least part of which will fall on the government to bear, economists said.

“There are two things this cash transfer program is supposed to do: prevent leakage from corruption, and bring everybody into the system,” said Surendra L. Rao, a former director general of the National Council of Applied Economic Research. “And I don’t see either happening anytime soon.”

The great promise of the cash transfer program — as well as its greatest point of contention — would come if it tackled India’s expensive and inefficient system for handing out food and subsidized fuel through nearly 50,000 government shops.

India spends almost $14 billion annually on this system, or nearly 1 percent of its gross domestic product, but the system is poorly managed and woefully inefficient.

Malavika Vyawahare contributed reporting.

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The Secret iPad List to Bring Down Boehener

When the failed House Republican revolution came, it came by iPad. Now that House Speaker John Boehner has survived the rebellion, all of D.C. now knows which conservative House members were conspiring to mount a challenge, thanks to a list that one of the coup’s leaders brandished on the House floor during the vote.

RELATED: United Nation Fights the ‘Asshole Factor’

A Politico photographer captured Rep. Tim Huelskamp of Kansas (pictured above), who Boehner had removed from a committee for refusing to cooperate, tapping his iPad during the roll call, checking off a list of names of other Congressmen he thought might join him in voting against Boehner. The list was titled, appropriately, “You would be fired if this goes out,” Politico’s Jake Sherman and John Bresnahan report. They hedge, “It’s not clear that any of the Republicans on Huelskamp’s list knew they were on it, or even knew of the list’s existence,” but let’s look at who were at least expected to vote against Boehner:

RELATED: Boehner Puts Down House Republican Coup

• Steve King of Iowa


• Cynthia Lummis of Wyoming


• Paul Gosar of Arizona


• Scott Garrett of New Jersey


• Steve Fincher of Tennessee


• Scott Desjarlais of Tennessee

Earlier this week, outgoing Louisiana Rep. Jeff Landry bragged to Breitbart News that the anti-Boehner ranks were 17 to 20 members strong, though in the end, only nine voted against their speaker, while two didn’t vote, and one voted present. Breitbart’s Matthew Boyle reports on Friday that there were several more names on Huelskamp‘s list:

RELATED: Boehner Was Afraid Issa Would Go Full Pumpkin-Shooter on His Holder Probe

• Jeff Duncan of South Carolina


• Mo Brooks of Alabama


• Sam Graves of Missouri


• Steve Southerland of Florida


• Trey Gowdy of South Carolina


• David Schweikert of Arizona


• Tom Cotton of Arkansas


• Brett Guthrie of Kentucky

Perhaps Huelskamp anticipated some would chicken out, since if some poor aide risked being “fired” for the list getting out, surely a House member might fear the wrath of Boehner for actually voting against him.

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Alison Sweeney Blogs: Biggest Loser's Kid Contestants Will Inspire Change

TV Watch

The Biggest Loser

By Alison Sweeney

01/04/2013 at 12:55 PM EST

Alison Sweeney hosts NBC's The Biggest Loser and is the award-winning star of Days of Our Lives, in addition to being an author, director, producer, wife and mom. Like she has for the past two seasons, Alison will blog each week about the latest episode of The Biggest Loser. Follow her on Twitter @Ali_Sweeney

Happy New Year!

I'm in New York for an appearance on Today to talk about the season 14 of The Biggest Loser. Having taken some time between seasons, I have to say, I really missed being on the Ranch and with the show trainers and contestants. When I introduced Bob Harper and Dolvett Quince to the crowd the first day of production, and then welcomed back Jillian Michaels, the reaction was exhilarating. Then, to welcome such a great group of contestants and surprise the audience with our three kids was AWESOME!

The childhood obesity epidemic in our country is frightening to me, particularly as a mom to two young children. I was heartbroken a few seasons ago when Max Morelli couldn't be part of the show because he was too young. I'm so glad the producers figured out a way for kids who want help to receive that help from the best in the business. These kids truly can inspire a change.

As I mentioned on The Ellen DeGeneres Show yesterday, my family and I spent the holidays skiing and snowboarding in Mammoth in California, and let me tell you – it was incredible! A gorgeous setting, tons of outdoor activities and waking up to snow on Christmas morning was just incredible. And between shoveling snow and hiking up the hill for a rogue snowboard, I got in several pretty tough workouts. At one point, Ben (my son) was so soaked from playing in the snow that I thought his clothes were going to freeze while he was wearing them!

We came back to Los Angeles a bit early for me to start 2013 doing the work that I love. First, I co-hosted the Tournament of Roses Parade for NBC with Al Roker. Having grown up in Pasadena, and having gone to the parade each year as a kid, the opportunity to co-host was one I couldn't pass up. The morning was definitely a very early one (which was a great excuse to have a quiet New Year's Eve at home with my family). Each of the floats was more gorgeous than the next and I loved the Dr. Seuss theme. My dad brought my kids to the route, where they got to come see me getting ready, and gushed about how amazing the floats are close-up. The horses were Megan's favorites, of course!

Yesterday's interview with Ellen was the first time I've seen her since our Jenga rematch. I never know what Ellen has in store for me when I'm on the show but I do know that I always have a good time while there. I had no idea we were going to play Guesstures. Ha! What fun. I love visiting Ellen. I always love reading your responses to our conversations on Twitter and Facebook.

Have you seen promos for the new season of The Biggest Loser? Are you excited for the show's return on Sunday (9 p.m. ET) and Monday (8 p.m. ET)? Are you ready to join Challenge America when the show premieres on Sunday and unlock the secrets to the Ranch? If so, you can pre-register now at biggestloser.com. Also make sure to follow me at @Ali_Sweeney and keep me posted on your thoughts throughout the season (or just laugh at some of the funny stuff I Tweet!).

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Indian court to rule on generic drug industry

NEW DELHI (AP) — From Africa's crowded AIDS clinics to the malarial jungles of Southeast Asia, the lives of millions of ill people in the developing world are hanging in the balance ahead of a legal ruling that will determine whether India's drug companies can continue to provide cheap versions of many life-saving medicines.

The case — involving Swiss drug maker Novartis AG's cancer drug Glivec — pits aid groups that argue India plays a vital role as the pharmacy to the poor against drug companies that insist they need strong patents to make drug development profitable. A ruling by India's Supreme Court is expected in early 2013.

"The implications of this case reach far beyond India, and far beyond this particular cancer drug," said Leena Menghaney, from the aid group Doctors Without Borders. "Across the world, there is a heavy dependence on India to supply affordable versions of expensive patented medicines."

With no costs for developing new drugs or conducting expensive trials, India's $26 billion generics industry is able to sell medicine for as little as one-tenth the price of the companies that developed them, making India the second-largest source of medicines distributed by UNICEF in its global programs.

Indian pharmaceutical companies such as Cipla, Cadila Laboratories and Lupin have emerged over the past decade as major sources of generic cancer, malaria, tuberculosis and AIDS drugs for poor countries that can't afford to pay Western prices.

The 6-year-old case that just wrapped up in the Supreme Court revolves around a legal provision in India's 2005 patent law that is aimed at preventing companies from getting fresh patents for making only minor changes to existing medicines — a practice known as "evergreening."

Novartis' argued that a new version of Glivec — marketed in the U.S. as Gleevec — was a significant change from the earlier version because it was more easily absorbed by the body.

India's Patent Controller turned down the application, saying the change was an obvious development, and the new medicine was not sufficiently distinct from the earlier version to warrant a patent extension.

Patient advocacy groups hailed the decision as a blow to "evergreening."

But Western companies argued that India's generic manufacturers were cutting the incentive for major drug makers to invest in research and innovation if they were not going to be able to reap the exclusive profits that patents bring.

"This case is about safeguarding incentives for better medicines so that patients' needs will be met in the future," says Eric Althoff, a Novartis spokesman.

International drug companies have accused India of disregarding intellectual property rights, and have pushed for stronger patent protection that would weaken India's generics industry.

Earlier this year, an Indian manufacturer was allowed to produce a far cheaper version of the kidney and liver cancer treatment sorefinib, manufactured by Bayer Corp.

Bayer was selling the drug for about $5,600 a month. Natco, the Indian company, said its generic version would cost $175 a month, less than 1/30th as much. Natco was ordered to pay 6 percent in royalties to Bayer.

Novartis says the outcome of the new case will not affect the availability of generic versions of Glivec because it is covered by a grandfather clause in India's patent law. Only the more easily absorbed drug would be affected, Althoff said, adding that its own generic business, Sandoz, produces cheap versions of its drugs for millions across the globe.

Public health activists say the question goes beyond Glivec to whether drug companies should get special protection for minor tweaks to medicines that others could easily have uncovered.

"We're looking to the Supreme Court to tell Novartis it won't open the floodgates and allow abusive patenting practices," said Eldred Tellis, of the Sankalp Rehabilitation Centre, a private group working with HIV patients.

The court's decision is expected to be a landmark that will influence future drug accessibility and price across the developing world.

"We're already paying very high prices for some of the new drugs that are patented in India," said Petros Isaakidis, an epidemiologist with Doctors Without Borders. "If Novartis' wins, even older medicines could be subject to patenting again, and it will become much more difficult for us in future to provide medicines to our patients being treated for HIV, hepatitis and drug resistant TB."

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Wall Street mixed following jobs, ISM data reports

NEW YORK (Reuters) - Stocks firmed on Friday after a jobs report showed the pace of hiring met expectations by easing slightly in December, but gave indications of momentum in the labor market recovery.

The market also reacted modestly to data from the Institute for Supply Management, which showed the U.S. service sector grew at its fastest pace in 10 months in December, boosted by a rise in new orders.

"The jobs number today was somewhat benign, it was pretty close to what estimates were, so there wasn't much to draw out volatility from that report," said Gordon Charlop, managing director at Rosenblatt Securities in New York.

"I get the sense we're just sort of going to digest the events of earlier this week," he said, referring to the "fiscal cliff" deal in Washington that averted a possible recession.

The S&P saw its largest gain in over a year to start 2013 on Wednesday, following the agreement struck late Tuesday.

The Labor Department said payrolls outside the farming sector grew 155,000 last month, slightly below November's level. Gains in employment were distributed broadly throughout the economy, from manufacturing and construction to healthcare.

Shares of Apple Inc dropped 2.9 percent to $526.20, continuing its downward path of recent months and pressuring the Nasdaq.

Adding to concerns about the iPhone maker's ability to produce more innovative products going forward, rival Samsung Electronics Co Ltd is expected to widen its lead over Apple in global smartphone sales this year with 35 percent growth, propped up by a broad product lineup, according to market researcher Strategy Analytics.

The Dow Jones industrial average <.dji> was up 3.99 points, or 0.03 percent, at 13,395.35. The Standard & Poor's 500 Index <.spx> gained 2.38 points, or 0.16 percent, at 1,461.75. The Nasdaq Composite Index <.ixic> dropped 3.47 points, or 0.11 percent, at 3,097.10.

New orders received by U.S. factories were flat in November, missing expectations as demand for aircraft sank sharply, although a gauge of business spending plans gave a positive sign for the economy.

The lackluster economic growth indicated by the jobs data did not make a dent in the still-high U.S. unemployment rate, but it calmed fears about the possibility of the U.S. Federal Reserve ending its highly stimulative monetary policy.

Concerns about the endurance of the Fed's stimulus program prompted investors to pull back from the market Thursday after a two-day rally.

Minutes from the Fed's December policy meeting, released Thursday, showed Fed officials were increasingly worried about the risks of asset purchases to financial markets, though they looked set to continue with the open-ended stimulus program for now.

Some policymakers thought asset buying should be slowed or stopped before the end of 2013 while others highlighted the need for further stimulus. The Fed's policy of easy credit has helped push the S&P 500 to a 13.4 percent gain in 2012. Ending that policy would remove an incentive for investors to purchase riskier assets like stocks.

The S&P Energy sector index <.gspe> rose again, up 0.7 percent, led by a 3.5 percent gain in shares of Chesapeake Energy .

Eli Lilly and Co stock rose 3.9 percent to $51.68 after the pharmaceuticals maker said it expects its 2013 earnings to increase to $3.75 to $3.90 per share excluding items from $3.30 to $3.40 per share in 2012.

Shares of Mosaic Co gained 2.6 percent to $58.25 on the fertilizer producer's announcement that its quarterly operating profit fell 30 percent as international distributors delayed buying potash and phosphate to avert the price risk associated with the company's negotiations with China and India.

(Additional reporting by Angela Moon; Editing by Bernadette Baum and Nick Zieminski)

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