Wall Street Week Ahead: Earnings, money flows to push stocks higher

NEW YORK (Reuters) - With earnings momentum on the rise, the S&P 500 seems to have few hurdles ahead as it continues to power higher, its all-time high a not-so-distant goal.

The U.S. equity benchmark closed the week at a fresh five-year high on strong housing and labor market data and a string of earnings that beat lowered expectations.

Sector indexes in transportation <.djt>, banks <.bkx> and housing <.hgx> this week hit historic or multiyear highs as well.

Michael Yoshikami, chief executive at Destination Wealth Management in Walnut Creek, California, said the key earnings to watch for next week will come from cyclical companies. United Technologies reports on Wednesday while Honeywell is due to report Friday.

"Those kind of numbers will tell you the trajectory the economy is taking," Yoshikami said.

Major technology companies also report next week, but the bar for the sector has been lowered even further.

Chipmakers like Advanced Micro Devices , which is due Tuesday, are expected to underperform as PC sales shrink. AMD shares fell more than 10 percent Friday after disappointing results from its larger competitor, Intel . Still, a chipmaker sector index <.sox> posted its highest weekly close since last April.

Following a recent underperformance, an upside surprise from Apple on Wednesday could trigger a return to the stock from many investors who had abandoned ship.

Other major companies reporting next week include Google , IBM , Johnson & Johnson and DuPont on Tuesday, Microsoft and 3M on Thursday and Procter & Gamble on Friday.

CASH POURING IN, HOUSING DATA COULD HELP

Perhaps the strongest support for equities will come from the flow of cash from fixed income funds to stocks.

The recent piling into stock funds -- $11.3 billion in the past two weeks, the most since 2000 -- indicates a riskier approach to investing from retail investors looking for yield.

"From a yield perspective, a lot of stocks still yield a great deal of money and so it is very easy to see why money is pouring into the stock market," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

"You are just not going to see people put a lot of money to work in a 10-year Treasury that yields 1.8 percent."

Housing stocks <.hgx>, already at a 5-1/2 year high, could get a further bump next week as investors eye data expected to support the market's perception that housing is the sluggish U.S. economy's bright spot.

Home resales are expected to have risen 0.6 percent in December, data is expected to show on Tuesday. Pending home sales contracts, which lead actual sales by a month or two, hit a 2-1/2 year high in November.

The new home sales report on Friday is expected to show a 2.1 percent increase.

The federal debt ceiling negotiations, a nagging worry for investors, seemed to be stuck on the back burner after House Republicans signaled they might support a short-term extension.

Equity markets, which tumbled in 2011 after the last round of talks pushed the United States close to a default, seem not to care much this time around.

The CBOE volatility index <.vix>, a gauge of market anxiety, closed Friday at its lowest since April 2007.

"I think the market is getting somewhat desensitized from political drama given, this seems to be happening over and over," said Destination Wealth Management's Yoshikami.

"It's something to keep in mind, but I don't think it's what you want to base your investing decisions on."

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak and Caroline Valetkevitch; Editing by Kenneth Barry)

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Cease-Fire in Myanmar With Kachin Rebels Fails to Take Hold

BANGKOK — A cease-fire ordered by the Myanmar government failed to take hold on Saturday, with rebels and the government blaming each other for fighting that continued through the day.

But ethnic Kachin rebels and at least one independent observer said that the fighting was less intense than in previous days and that the government’s aerial bombardments had stopped. Both the government and the rebels called for a negotiated settlement, although they seemed far from agreeing on the fundamental question of how much autonomy the Kachin ethnic group should have — the emotionally charged issue at the root of the fighting.

“We have been inviting the K.I.O. into the peace process, and here I would like to invite them again,” President Thein Sein said Saturday, referring to the Kachin Independence Organization, the political wing of the group fighting the government.

Mr. Thein Sein spoke as representatives from at least two dozen countries and international organizations including the World Bank gathered in the Myanmar capital, Naypyidaw, for a conference on offering assistance to the country as it moves toward democracy after decades of military rule.

Many observers have said that the government may have decided to offer a unilateral cease-fire on Friday to coincide with the meeting since national reconciliation with Myanmar’s many ethnic groups is seen as a measure of the success of Mr. Thein Sein’s ambitious democratic reforms.

Although the government has signed cease-fire agreements with other minority groups, it has been fighting the Kachin for the last year and a half after an earlier truce collapsed. The conflict had intensified in recent weeks.

Despite the continued battles Saturday, there were some faint but encouraging signs of progress toward a peaceful settlement. The Kachin Independence Organization issued a statement calling for the cease-fire to include all of Kachin State, the mountainous, northernmost part of Myanmar and the homeland of the Kachin, suggesting it welcomed a halt to the fighting.

The government’s announcement on Friday mentioned only the area near the border with China known as Lajayang, but a government spokesman, Ye Htut, said by telephone on Saturday that the cease-fire would encompass “the whole conflict area.”

And yet the developments on Saturday followed a familiar pattern in Myanmar — a seeming disconnect between the orders of the president, who is not the commander in chief under the country’s new constitution, and the actions of the military. Mr. Thein Sein has said before that the army should only defend itself, but some analysts say that leaves it wide latitude.

On Saturday, Mr. Ye Htut acknowledged the fighting but said that it had been initiated by the rebels and that the troops had been acting in self-defense.

La Nan, a spokesman for the Kachin Independence Organization, said there were Myanmar artillery attacks and “skirmishes” on Saturday morning around Lajayang, at the very place and time the cease-fire was supposed to take effect.

Ryan Roco, an American photographer who was in the area, said there were no airstrikes and “minimal ground fighting” on Saturday. “But the shelling continued all day,” he said by telephone.

One fighter who is allied with the Kachin rebels, Min Htay, posted on his Facebook page that the Kachin were broadcasting a message over loudspeakers to government soldiers, telling them to stop fighting because the president had issued a cease-fire. Mr. Min Htay appeared to be suggesting that the government troops were not aware of the order, a possible sign of a rift between the military leadership and the president.

Mr. Ye Htut denied there was any such disagreement. “Government troops always obey President U Thein Sein’s order,” he said.

Myanmar’s many ethnic groups, which make up about one-third of the population, have called for a greater federal system, but Mr. Thein Sein appears to favor a more centralized union that would preserve the pre-eminence of the majority Burmese ethnic group. The current constitution calls for a hybrid system of local administrations and a powerful central government.

Wai Moe contributed reporting from Yangon, Myanmar.

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Dotcom says new site legal, no revenge for Megaupload saga

AUCKLAND (Reuters) – Kim Dotcom, founder of outlawed file-sharing website Megaupload, said his new “cyberlocker” was not revenge on U.S. authorities who planned a raid on his home, closed Megaupload and charged him with online piracy for which he faces jail if found guilty.

Dotcom said his new offering, Mega.co.nz, which will launch on Sunday even as he and three colleagues await extradition from New Zealand to the United States, complied with the law and warned that attempts to take it down would be futile.

“This is not some kind of finger to the U.S. government or to Hollywood,” Dotcom told Reuters at his sprawling estate in the bucolic hills of Coatesville, just outside Auckland, New Zealand, a country known more for sheep, rugby and the Hobbit than flamboyant tech tycoons.

“Legally, there’s just nothing there that could be used to shut us down. This site is just as legitimate and has the right to exist as Dropbox, Boxnet and other competitors,” he said, referring to other popular cloud storage services.

His lawyer, Ira Rothken, added that launching the site was compliant with the terms of Dotcom’s bail conditions. U.S. prosecutors argue that Dotcom in a statement said he had no intention of starting a new internet business until his extradition was resolved.

CODES AND KEYS

Dotcom said Mega was a different beast to Megaupload, as the new site enables users to control exactly which users can access uploaded files, in contrast to its predecessor, which allowed users to search files, some of which contained copyrighted content allegedly without permission.

A sophisticated encryption system will allow users to encode their files before they upload them on to the site’s servers, which Dotcom said were located in New Zealand and overseas.

Each file will then be issued a unique, sophisticated decryption key which only the file holder will control, allowing them to share the file as they choose.

As a result, the site’s operators would have no access to the files, which they say would strip them from any possible liability for knowingly enabling users to distribute copyright-infringing content, which Washington says is illegal.

“Even if we wanted to, we can’t go into your file and snoop and see what you have in there,” the burly Dotcom said.

Dotcom said Mega would comply with orders from copyright holders to remove infringing material, which will afford it the “safe harbor” legal provision, which minimizes liability on the condition that a party acted in good faith to comply.

But some legal experts say it may be difficult to claim the protection if they do not know what users have stored.

The Motion Pictures Association of America said encrypting files alone would not protect Dotcom from liability.

“We’ll reserve final judgment until we have a chance to analyze the new project,” a spokesman told Reuters. “But given Kim Dotcom’s history, count us as skeptical.”

The German national, who also goes by Kim Schmitz, expects huge interest in its first month of operation, which would be a far cry from when Megaupload went live in 2005.

“I would be surprised if we had less than one million users,” Dotcom said.

A YEAR ON

Mega’s launch starts the next chapter of the Dotcom narrative, dotted with previous cyber crime-related arrests and whose twists and turns have been scrutinized by all facets of the entertainment industry, from film studios and record labels to internet service companies and teenage gamers.

The copyright infringement case, billed as the largest to date given that Megaupload in its heyday commanded around four percent of global online traffic, could set a precedent for internet liability laws and depending on its outcome, may force entertainment companies to rethink their distribution methods.

A year on, the extradition hearing has been delayed until August, complicated by illegal arrest warrants and the New Zealand government’s admission that it had illegally spied on Dotcom, who has residency status in the country.

Last January, New Zealand’s elite special tactics forces landed by helicopter at dawn in the grounds of Dotcom’s mansion, worth roughly NZ$ 30 million ($ 25.05 million) and featuring a servants’ wing, hedge maze and life-size statues of giraffes and a rhinoceros, to arrest him and his colleagues at the request of the FBI.

Police armed with semi-automatic weapons found Dotcom cowering alone in a panic room in the attic, while outside, a convoy of police cars and vans pulled up in the driveway. Around 70 officers took part in the raid.

They left with computers, files and some of Dotcom’s fleet of Rolls-Royces, Mercedes and a vintage pink Cadillac tricked with personalized license plates screaming “HACKER”, “EVIL”, and “MAFIA”.

“Every time you hear a helicopter, you automatically think, ‘Oh, another raid’, so it’s something that stays with you for a long time,” said Dotcom, who says he and his wife still panic when they hear sudden, loud noises in the house.

Dotcom was coy about the details of the launch party as builders put the finishing touches to a festival-sized concert stage in the mansion’s grounds, while two helicopters circled overhead.

But if the impromptu, Willy Wonka-styled ice cream social he threw in Auckland earlier in the week is any indication, the party could be a more wholesome affair compared with the well-documented soirees of Dotcom’s past, where nightclubs, hot tubs and scantily clad women were a common fixture.

“I had to grow up, you know, I was a big baby,” he said. “Big baby with too much money usually leads to baby craziness.

“I am going to be more of a person that wants to help to make things better and help internet innovation to take off without all these restrictions by governments. That is going to be my primary goal if this business is successful.”

($ 1 = NZ$ 1.2)

(Editing by Daniel Magnowski and Nick Macfie)

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Lena Dunham, Mindy Kaling Score Celeb Followers on Twitter

Want to get a celebrity following on Twitter? It's easy – just make 'em laugh.

Stars at the Golden Globes recently admitted that humor is what gets them to follow someone on Twitter, with Modern Family writer/executive producer Danny Zuker and Mindy Kaling scoring follows from celebs.

"I'm bad at knowing who I'm following. I recognize people from the color of their clothes and their avatar," Modern Family's Eric Stonestreet admitted. "There's some girl in a blue dress and a blue hat that's cracking me up right now." (A quick look at his account makes us think it's self-described "freelance rapper" Amber.

For Zooey Deschanel, Girls star Lena Dunham and New Girl costar Max Greenfield fill her Twitter feed.

Check out which other funny accounts have stars all a-twitter (ha!) and don't forget to follow PEOPLE on Twitter. (And while you're there, check out one of our favorite funny guys, George Takei.)

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Flu remains widespread in US; eases in some areas

Nine more children or teens have died of the flu, bringing the nation's total this flu season to 29, health officials reported Friday.

In a typical season, about 100 children die of the flu, so it is not known whether this year will be better or worse than usual.

So far, half of confirmed flu cases are in people 65 and older, the Centers for Disease Control and Prevention reported.

This year's season is earlier than normal and the dominant flu strain is one that tends to make people sicker. The flu is widespread in all states but Tennessee and Hawaii and is starting to ease in some areas, the CDC said.

Health officials say it's not too late to get a flu shot to help protect against the flu. Vaccinations are recommended for anyone 6 months or older.

Last week, the CDC said the flu again surpassed an "epidemic" threshold, based on monitoring of deaths from flu and a frequent complication, pneumonia. The flu epidemic happens every year and officials say this year's vaccine is a good match for strains that are going around.

The government doesn't keep a running tally of adult deaths from the flu, but estimates that it kills about 24,000 people most years.

___

Online:

CDC flu: http://www.cdc.gov/flu/index.htm

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Wall Street edges lower after disappointing Intel results

NEW YORK (Reuters) - Stocks edged lower on Friday from a five-year high for the S&P 500 as a weak outlook from tech heavyweight Intel offset a better-than-expected quarterly profit at Morgan Stanley.

But the S&P 500 was still on track to end higher for a third consecutive week.

Shares of Intel Corp slumped nearly 7 percent to $21.11 a day after it forecast quarterly revenue below analysts' estimates and announced plans for increased capital spending amid slow demand for personal computers.

"Intel earnings weren't that bad, although their revenue was weak. It sparks fears about not only the company but about the whole PC sector, and that's pressuring the market today," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

The Intel results were offset somewhat by Morgan Stanley , which reported a fourth-quarter profit after a year-earlier loss, helped by higher revenue at the bank's institutional securities business. Its stock jumped 7.4 percent to $22.29.

Overall, S&P 500 fourth-quarter earnings rose an estimated 2.5 percent, according to Thomson Reuters data. Expectations for the quarter have dropped considerably since October, when a 9.9 percent gain was estimated.

The Dow Jones industrial average <.dji> was down 15.17 points, or 0.11 percent, at 13,580.85. The Standard & Poor's 500 Index <.spx> was down 3.51 points, or 0.24 percent, at 1,477.43. The Nasdaq Composite Index <.ixic> was down 13.98 points, or 0.45 percent, at 3,122.03.

On Thursday, the S&P 500 rose to its highest since late 2007, and that could prompt investors to lock in recent gains, analysts said.

Despite the day's decline, market sentiment was still positive on speculation that chances were better of avoiding a debt ceiling fight in Washington. House Republicans signaled on Thursday they might support a short-term extension of U.S. borrowing authority next month.

"The debt ceiling issue is sort of out of the news. The market has definitely become complacent. And we all know that the issue will be dealt with, we just need to find out when. If December is any guide, they are going to leave it up to the last minute so the market is definitely more complacent than it should be for now," Ghriskey said.

Reflecting the complacency, the CBOE Volatility index <.vix>, Wall Street's so-called fear gauge, fell 4.1 percent at just above 13. The VIX usually moves inversely to the S&P 500 as it is used as a hedge tool against further market decline.

Economic data from China provided some support to the market, though the focus remained on U.S. corporate earnings. The country's economy grew at a modestly faster-than-expected 7.9 percent in the fourth quarter, the latest sign the world's second-biggest economy was pulling out of a post-global financial crisis slowdown which saw it grow in 2012 at its weakest pace since 1999.

General Electric reported a better-than-expected rise in earnings, spurred by robust demand in China and oil-producing countries. Shares were up 2.9 percent to $21.92.

Despite the gains by Morgan Stanley, financial stocks sagged as Capital One Financial reported disappointing profit. Capital One slumped 7.7 percent to $56.87, while the KBW bank index <.bkx> slipped 0.9 percent.

Research In Motion climbed 6.6 percent to $15.91 after Jefferies Group boosted the BlackBerry maker's rating and price target.

(Editing by Bernadette Baum, Kenneth Barry and Nick Zieminski)

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IHT Rendezvous: How Far Will Europeans Support France's Counter-Jihad?

LONDON — It did not require a crystal ball to foresee, as Rendezvous did in our 2013 preview, that Mali would be in the news and that France might be the first to intervene there to counter a perceived terrorist threat to Europe.

Less predictable, however, is the extent to which the French can rely on the support of their European allies now that they have decided to go it alone.

The crisis had been building for the best part of a year since mutinous soldiers staged a coup in Bamako, the Malian capital, last March, and separatist Tuareg tribesmen took the opportunity to seize the north of the country. The tribesmen were quickly pushed aside by radical Islamists, including those behind this week’s hostage-taking in neighboring Algeria.

They were poised to extend their rule this month beyond the two-thirds of the country they already control when the French stepped in at the request of the Bamako government.

As early as last April, Alain Juppé, the then French foreign minister, was warning of the “extremely grave threat” posed by the Qaeda-linked insurgents and their aim of establishing a jihadist regime in northern Mali.

In early September, António Guterres, the United Nations High Commissioner for Refugees, was telling readers of the IHT:

If unchecked, the Mali crisis threatens to create an arc of instability extending west into Mauritania and east through Niger, Chad and Sudan to the Horn of Africa and the Gulf of Aden, characterized by extended spaces where state authority is weak and pockets of territorial control are exercised by transnational criminals.

So, did the international community, and Europe in particular, react too slowly to the escalating crisis? Or has France acted precipitously in opting for a military solution to contain the threat?

David Rohde writes elsewhere on Rendezvous that regional experts believe the French had to act.

But, as French troops launched ground operations this week in support of local forces, how far are France’s European allies prepared to be sucked into a potential Malian quagmire?

Germany, Denmark and Britain are among European Union partners that have offered logistical support in Mali.

However, as David Cameron, the British prime minister, assured Parliament when he announced the offer of transport aircraft to assist the French mission, there was no question of putting British boots on the ground.

The government of Chancellor Angela Merkel is being even more cautious, limiting its assistance to supplying planes to airlift African troops from the regional ECOWAS alliance.

“Under no circumstances does Germany want to become involved in a messy conflict with no clear end in sight,” Germany’s Der Spiegel commented, “particularly not in an election year.”

Germany held out against intervention in Libya in 2011, eventually spearheaded by France and Britain, siding with Russia in a crucial United Nations vote in defiance of its European allies.

Libya underlined the lack of a common foreign policy, let alone a common defense policy, among the 27 European partners who now face a new crisis in North Africa.

Facing recriminations from some in France that it was only its soldiers who were doing the fighting, European foreign ministers agreed on Thursday to speed up the dispatch of more than 200 military personnel to train Malian government forces to confront the Islamists.

But that was an option that had been on the table since October, when European Union officials said the alliance was considering such a move.

The E.U. also stressed that the trainers, due to be deployed by mid-February at the latest, would not be involved in combat operations.

Commenting on the outcome of Thursday’s meeting, Christophe Giltay of Belgium’s RTL broadcaster, said, “More and more French people are asking themselves if the Europeans have really understood the gravity of the situation.”

Alexandra de Hoop Scheffer and Martin Michelot of the Washington-based German Marshall Fund of the United States wrote this week that “the glacial pace at which decisions are taken at the national level to support France’s efforts in Mali only underscores the need for European leaders to be willing to discuss common security issues.”

Catherine Ashton, the European Union foreign policy chief, said on Thursday some of France’s partners were “willing to help and support France in every way and they did not rule in or rule out any aspect of that, including military support.”

But, according to the German Marshall Fund experts: “The French military is nevertheless facing the hard reality of acting on its own, with very little support from other European allies.”

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Mindy McCready's Troubled Life in 5 Clicks

From country music success to a battle with addictions and a penchant for self-harm, retrace how the singer's life has unraveled

Credit: Fred Prouser/Reuters/Landov

Updated: Wednesday Jan 16, 2013 | 06:00 PM EST
By: Mike Fleeman

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Study: NYC better than LA at cutting kids' obesity

NEW YORK (AP) — A new study shows New York City is doing better than Los Angeles in the battle against childhood obesity, at least for low-income children.

From 2003 to 2011, obesity rates for poor children dropped in New York to around 16 percent. But they rose in Los Angeles and ended at about 20 percent.

The researchers focused on children ages 3 and 4 enrolled in a government program that provides food and other services to women and their young children.

The Centers for Disease Control and Prevention released the study Thursday.

The authors noted that the Los Angeles program has many more Mexican-American kids. Obesity is more common in Mexican-American boys than in white or black kids.

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Economy, eBay profit lift Wall Street to five-year high

NEW YORK (Reuters) - Wall Street rose on Thursday, with the S&P 500 hitting a five-year intraday high, on improved housing and jobs data as well as better-than-expected results from online marketplace eBay .

The data showed the number of Americans filing new claims for unemployment benefits fell to a five-year low last week, while groundbreaking for homes rose to the fastest pace in four years last month.

Strength in the housing and labor markets is key to sustained growth and higher corporate profits. Job market improvement helps boost consumer spending while a recovery in housing means more purchases of appliances, furniture and other household goods as well as a source of employment.

"The unemployment claims were nice, the housing starts were nice, so that is positive for us. There are some good positive vibes out there," said Harry Clark, chief executive of Clark Capital Management Group in Philadelphia.

The Dow Jones industrial average <.dji> gained 69.83 points, or 0.52 percent, to 13,581.06. The Standard & Poor's 500 Index <.spx> added 7.31 points, or 0.50 percent, to 1,479.94. The Nasdaq Composite Index <.ixic> rose 17.74 points, or 0.57 percent, to 3,135.29.

PulteGroup Inc shares gained 2.4 percent to $19.81 and Toll Brothers Inc advanced 1.9 percent to $35.56. The PHLX housing sector index <.hgx> climbed 1.5 percent.

EBay's shares rose 3 percent to $54.51 a day after it reported holiday quarter results that just beat Wall Street expectations. It gave a 2013 forecast that was within analysts' estimates.

The S&P is on track for its third consecutive advance, which pushed the index above an intraday peak set in September to its highest since December 2007.

But gains were tempered by weakness in the financial sector, with Bank of America down 3.4 percent to $11.38 and Citigroup off 2.8 percent to $41.29 after they posted their results.

Bank of America's fourth-quarter profit fell as it took more charges to clean up mortgage-related problems. Citigroup posted $2.32 billion of charges for layoffs and lawsuits, while its new chief executive cautioned the bank needed more time to deal with its problems.

The S&P financial sector index <.spsy> slipped 0.06 percent as the only one of the 10 major S&P sectors to decline.

S&P 500 corporate earnings for the fourth quarter are expected to rise 2.3 percent, Thomson Reuters data showed. Expectations for the quarter have fallen considerably since October when a 9.9 percent gain was estimated.

With investors anticipating the current earnings season to be lackluster, their focus will be on the corporate earnings outlook for the months ahead, analysts said.

Shares of Boeing extended recent declines after the United States and other countries grounded the company's new 787 Dreamliner after a second incident involving battery failure. Boeing slipped 0.8 percent to $73.77 and is down 1.7 percent for the week so far.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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