Investors face another Washington deadline

NEW YORK (Reuters) - Investors face another Washington-imposed deadline on government spending cuts next week, but it's not generating the same level of fear as two months ago when the "fiscal cliff" loomed large.

Investors in sectors most likely to be affected by the cuts, like defense, seem untroubled that the budget talks could send stocks tumbling.

Talks on the U.S. budget crisis began again this week leading up to the March 1 deadline for the so-called sequestration when $85 billion in automatic federal spending cuts are scheduled to take effect.

"It's at this point a political hot button in Washington but a very low level investor concern," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. The fight pits President Barack Obama and fellow Democrats against congressional Republicans.

Stocks rallied in early January after a compromise temporarily avoided the fiscal cliff, and the Standard & Poor's 500 index <.spx> has risen 6.3 percent since the start of the year.

But the benchmark index lost steam this week, posting its first week of losses since the start of the year. Minutes on Wednesday from the last Federal Reserve meeting, which suggested the central bank may slow or stop its stimulus policy sooner than expected, provided the catalyst.

National elections in Italy on Sunday and Monday could also add to investor concern. Most investors expect a government headed by Pier Luigi Bersani to win and continue with reforms to tackle Italy's debt problems. However, a resurgence by former leader Silvio Berlusconi has raised doubts.

"Europe has been in the last six months less of a topic for the stock market, but the problems haven't gone away. This may bring back investor attention to that," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

OPTIONS BULLS TARGET GAINS

The spending cuts, if they go ahead, could hit the defense industry particularly hard.

Yet in the options market, bulls were targeting gains in Lockheed Martin Corp , the Pentagon's biggest supplier.

Calls on the stock far outpaced puts, suggesting that many investors anticipate the stock to move higher. Overall options volume on the stock was 2.8 times the daily average with 17,000 calls and 3,360 puts traded, according to options analytics firm Trade Alert.

"The upside call buying in Lockheed solidifies the idea that option investors are not pricing in a lot of downside risk in most defense stocks from the likely impact of sequestration," said Jared Woodard, a founder of research and advisory firm condoroptions.com in Forest, Virginia.

The stock ended up 0.6 percent at $88.12 on Friday.

If lawmakers fail to reach an agreement on reducing the U.S. budget deficit in the next few days, a sequester would include significant cuts in defense spending. Companies such as General Dynamics Corp and Smith & Wesson Holding Corp could be affected.

General Dynamics Corp shares rose 1.2 percent to $67.32 and Smith & Wesson added 4.6 percent to $9.18 on Friday.

EYES ON GDP DATA, APPLE

The latest data on fourth-quarter U.S. gross domestic product is expected on Thursday, and some analysts predict an upward revision following trade data that showed America's deficit shrank in December to its narrowest in nearly three years.

U.S. GDP unexpectedly contracted in the fourth quarter, according to an earlier government estimate, but analysts said there was no reason for panic, given that consumer spending and business investment picked up.

Investors will be looking for any hints of changes in the Fed's policy of monetary easing when Fed Chairman Ben Bernake speaks before congressional committees on Tuesday and Wednesday.

Shares of Apple will be watched closely next week when the company's annual stockholders' meeting is held.

On Friday, a U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with the iPhone maker, blocking the company from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.

(Additional reporting by Doris Frankel; Editing by Kenneth Barry)

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Italy Set to Vote for a New Parliament

ROME — As Italian voters head to the polls on Sunday and Monday to elect a new Parliament and three regional governments, the prevailing mood is one of anger and disillusionment.

The fledgling, anti-establishment parties that campaigned on promises of radical change could benefit from the voters’ discontent, but the lack of a clear winner could also leave Italy mired in uncertainty.

“Italians feel frustration, anger, but also some hope for renewal,” said Nicola Piepoli, who runs a polling company. They are frustrated, he said, because their taxes are rising but they see no improvements in their “economic and social life,” and they are angry because candidates did not address “concrete problems” during the campaign, focusing instead on “futile, absurd things.”

“But many still hope for some change,” Mr. Piepoli added, explaining the growing support for populists like the comedian Beppe Grillo and his Five Star Movement, and for smaller parties like Civil Revolution, led by Antonio Ingroia, a former prosecutor, and Act to Stop the Decline, a movement guided by Oscar Giannino, a journalist.

Mostly though, the mood is dark among Italians fed up with protracted political scandals and disinclined to believe election promises because they are so rarely fulfilled.

(On Friday, former Prime Minister Silvio Berlusconi, campaigning to return to office, made a new promise: he said that if he won, he would personally refund an unpopular property tax paid by Italians in 2012. “I will take four billion euros of my own fortune and give it to Italians,” he said on television, a pledge of about $5.3 billion.)

“There’s no one to vote for, and if I went to the polls I’d choose the least-worst candidate, so I prefer not to vote,” said Concetta Rossi, a recruiter for hotel employees in Rome. “It’s never been this bad.”

The center-left Democratic Party, led by Pier Luigi Bersani, a low-key former industry minister, is expected to place first but is unlikely to win enough seats to govern without a coalition. The centrist movement backing the current prime minister, Mario Monti, is a possible ally, but even together they might not prevail in the Senate because the electoral law allocates seats based on regional votes. Lombardy and Sicily, where polls suggest that the right is strong, are crucial.

For the past year, Mr. Bersani, a former Communist who has played up his Catholic upbringing, has supported Mr. Monti’s reformist agenda, though sometimes grudgingly. He has backed Mr. Monti’s commitments to the European Union for greater fiscal responsibility, but would review policies that might have hurt workers and retirees.

Investors and economic analysts have their own concerns about the potential instability that could emerge in the absence of a strong government.

In its 15 months in office, Mr. Monti’s technocratic government tried to pass much-needed reforms, but it failed to stimulate the economic growth required to pull Italy out of a persistent recession. On Friday, the European Commission said in its winter forecast that Italy’s economy would shrink by 1 percent in 2013, double its November estimate.

Gains made by anti-establishment parties, including the Five Star Movement, could stall Mr. Monti’s overhauls, and a strong showing by the center-right party led by Mr. Berlusconi could derail the austerity measures meant to keep Italy on a fiscally responsible track.

“The fear remains that the general election produces a significant no-confidence vote on the current austerity plan and the need to reform further,” Raj Badiani, an economist with IHS Global Insight, wrote in a research report last week. “Without the prospect of a stable coalition government with a credible reform agenda, Italy could be forced to reconstruct a technocratic government to keep the markets at bay.”

Alessandro Amadori, the director of Coesis, which conducts marketing and opinion polls, said the “emotional mapping” of Italy highlighted the population’s “disenchantment and rage,” and even its resignation. “People don’t think that much will change. They hope for a sign, but they don’t have high expectations.”

Mr. Amadori added: “These elections will probably mark a moment of transition, rather than long-term change. Italians are looking for something that will shake things up, but what will emerge, we still don’t know.”

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Readers Predict Argo and Les Mis To Be Oscar Winners

02/22/2013 at 01:00 PM EST

If the academy were made up of PEOPLE readers, Ben Affleck's Argo and Les Misérables would take home a lot of gold come Sunday night.

As we countdown to the Academy Awards on PEOPLE.com, readers are predicting the winners on our interactive Oscar ballot.

You can still vote, but so far readers picked Argo and its star director to win in three categories: Best Picture (45% – runner-up Lincoln came in at 15%), Best Adapted Screenplay and Editing. You're also loving Les Misérables, picking it to win four awards: Best Supporting Actress, Anne Hathaway (The star has a whopping 75%); Production Design, Costume Design, Sound Mixing and Makeup.

In the other biggies, Best Actor and Best Actress, readers chose Daniel Day-Lewis (for Lincoln (62%) and Jennifer Lawrence (for Silver Linings Playbook (56%)). For Best Supporting Actor, you're liking Christopher Waltz in Django Unchained.

Want to see the up-to-the-minute results of our reader ballot? Then cast your votes here to see what readers are saying right now.

We'll see you Sunday night with a live blog and all the latest news, glam and gowns during the show!

The 85th annual Academy Awards will air live on ABC starting at 7 p.m. ET/4 p.m. PT on Sunday, Feb. 24, from the Dolby Theatre in Hollywood.

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FDA approves new targeted breast cancer drug

WASHINGTON (AP) — The Food and Drug Administration has approved a first-of-a-kind breast cancer medication that targets tumor cells while sparing healthy ones.

The drug Kadcyla (kad-SY'-luh) from Roche combines the established drug Herceptin with a powerful chemotherapy drug and a third chemical linking the medicines together. The chemical keeps the cocktail intact until it binds to a cancer cell, delivering a double-shot of anti-tumor poison.

Cancer researchers say the drug may offer a clear advantage over older drugs because it delivers more medication with fewer side effects.

The FDA approved the new treatment for about 20 percent of breast cancer patients with a form of the disease that is typically more aggressive and less responsive to hormone therapy. These patients have tumors that overproduce a protein known as HER-2.

The approval will help Roche's Genentech unit build on the blockbuster success of Herceptin, which has long dominated the breast cancer marketplace. The drug had sales of roughly $6 billion last year.

Genentech said Friday that Kadcyla will cost $9,800 per month, compared to $4,500 per month for regular Herceptin. The company estimates a full course of Kadcyla, about nine months of medicine, will cost $94,000.

FDA scientists said they approved the drug based on company studies showing Kadcyla delayed the progression of breast cancer by several months. Researchers reported last year that patients treated with the drug lived 9.6 months before death or the spread of their disease, compared with a little more than six months for patients treated with two other standard drugs, Tykerb and Xeloda.

Overall, patients taking Kadcyla lived about 2.6 years, compared with 2 years for patients taking the other drugs.

FDA specifically approved the drug for patients with advanced breast cancer who have already been treated with Herceptin and taxane, a widely used chemotherapy drug.

Kadcyla will carry a boxed warning, the most severe type, alerting doctors and patients that the drug can cause liver toxicity, heart problems and potentially death. The drug can also cause severe birth defects and should not be used by pregnant women.

Kadcyla was co-developed by South San Francisco-based Genentech and ImmunoGen Inc., of Waltham, Mass. ImmunoGen developed the technology that binds the drug ingredients together and is scheduled to receive a $10.5 million payment from Genentech on the FDA decision. The company will also receive additional royalties on the drug's sales.

Shares of ImmunoGen Inc. rose 33 cents, or 2.27 percent, to $14.63 in midday trading.

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HP lifts Wall Street, S&P on pace for first weekly loss of year

NEW YORK (Reuters) - Stocks rose on Friday, rebounding off two days of losses as Dow component Hewlett-Packard surged on strong results, but the S&P 500 was on track to end a seven-week-long streak of gains.

The S&P shed 1.9 percent over the previous two sessions, its worst two-day drop since early November, putting the index on pace for its first weekly decline of the year. The retreat was triggered when the Federal Reserve's meeting minutes for January suggested stimulus measures may be halted sooner than thought.

Still, the index is up nearly 6 percent for the year and held the 1,500 support level despite the recent declines, a sign of a positive bias in the market.

"The market is addicted to Fed stimulus and gets withdrawal shakes every time that's threatened, but now we're resuming our course and remain much more attractively valued than other asset classes," said Rex Macey, chief investment officer at Wilmington Trust in Atlanta, Georgia.

Hewlett-Packard Co jumped 9.6 percent to $18.74 as the top boost on both the Dow and S&P 500 after the PC maker's quarterly revenue and forecasts beat expectations. The company cut costs under Chief Executive Meg Whitman's turnaround plan. The S&P technology sector <.splrct> was up 0.8 percent.

The Dow Jones industrial average <.dji> was up 69.41 points, or 0.50 percent, at 13,950.03. The Standard & Poor's 500 Index <.spx> was up 7.74 points, or 0.52 percent, at 1,510.16. The Nasdaq Composite Index <.ixic> was up 18.26 points, or 0.58 percent, at 3,149.75.

For the week, the Dow is off 0.2 percent in its third straight week of slight losses, the S&P is off 0.6 percent and the Nasdaq is off 1.3 percent.

Also buoying tech stocks were gains in semiconductor companies after Marvell Technology Group Ltd forecast results this quarter that were largely above analysts' expectations. Marvell gained market share in the hard-disk drive and flash-storage businesses. The stock rose 2.5 percent to $9.71.

In addition, Texas Instruments Inc raised its dividend by a third and boosted its stock buyback program, lifting shares 5.1 percent to $34.16 while the PHLX semiconductor index <.sox> gained 1.8 percent.

"Dividends growing are another way the market's level is justified, if not especially attractive at these levels," said Macey, who manages about $20 billion in assets.

On the downside, Abercrombie & Fitch dropped 7.6 percent to $45.34 after the clothing retailer reported a drop in fourth-quarter comparable sales, even as its latest quarterly earnings topped estimates.

Insurer American International Group Inc posted fourth-quarter results that beat analysts' expectations. Shares advanced 3 percent to $38.43.

According to Thomson Reuters data through Friday morning, of 439 companies in the S&P 500 that have reported results, 70 percent have exceeded analysts' expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters.

Fourth-quarter earnings for S&P 500 companies are estimated to have risen 6 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

(Editing by Kenneth Barry)

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HTC settles FTC charges that it fails to secure software

WASHINGTON (Reuters) – HTC America, a maker of cell phones that use Android and Windows software, has agreed to settle Federal Trade Commission charges that it failed to take adequate steps to eliminate security flaws that put smartphone and tablet users’ data at risk, the agency said on Friday.

HTC America, a subsidiary of HTC Corp in Taiwan, made millions of phones with programming flaws that allowed third-party applications to evade Android’s permission-based security model, the FTC said in a release.

The settlement requires HTC to establish a comprehensive security program and patch the software holes, the FTC said.

(Reporting By Diane Bartz)

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The Duggars Visit Asia on Upcoming TLC Special: Catch a Sneak Peek

TV Watch

By Tim Nudd

02/21/2013 at 12:50 PM EST

Kids, we're not in Arkansas anymore.

One of America's most populous family, the Duggars, visit the world's most populous country, China, as part of a longer trip to Asia captured in a three-episode special coming to TLC in March.

Getting 25 Duggars and their 40 suitcases to the airport is a struggle all its own. But then they tour Japan and China, where the familiar logistical challenges are compounded by the cultural differences.

Their adventures find them experimenting with local food, riding Rickshaws, donning traditional Geisha dress and fighting as Samurai warriors.

In Beijing, they finally negotiate the subway and get to Tiananmen Square, only to find themselves to be something of a tourist attraction in their own right.

19 Kids and Counting: Duggars Do Asia will air on TLC on March 12, 19 and 26 at 9ET/PT.

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Flu shot did poor job against worst bug in seniors

ATLANTA (AP) — For those 65 and older, this season's flu shot is only 9 percent effective against the most common and dangerous flu bug, according to a startling new government report.

Flu vaccine tends to protect younger people better than older ones and never works as well as other kinds of vaccines. But experts say the preliminary results for seniors are disappointing and highlight the need for a better vaccine.

For all age groups, the vaccine's effectiveness is moderate at 56 percent, which is nearly as well as other flu seasons, the Centers for Disease Control and Prevention said Thursday.

For those 65 and older, it is 27 percent effective against the three strains in the vaccine, the lowest in about a decade but not far below from what's expected. But the vaccine did a particularly poor job of protecting older people against the harshest flu strain, which is causing most of the illnesses this year. CDC officials say it's not clear why.

Vaccinations are now recommended for anyone over 6 months, and health officials stress that some vaccine protection is better than none at all. While it's likely that older people who were vaccinated are still getting sick, many of them may be getting less severe symptoms.

"Year in and year out, the vaccine is the best protection we have," said CDC flu expert Dr. Joseph Bresee.

To be sure, the preliminary data for seniors is less than definitive. It is based on fewer than 300 people scattered among five states.

But it will no doubt surprise many people that the effectiveness is that low, said Michael Osterholm, a University of Minnesota infectious disease expert who has tried to draw attention to the need for a more effective flu vaccine.

Among infectious diseases, flu is considered one of the nation's leading killers. On average, about 24,000 Americans die each flu season, according to the CDC.

This flu season started in early December, a month earlier than usual, and peaked by the end of year. Older people are most vulnerable to flu and its complications, and the nation has seen some of the highest hospitalization rates for people 65 and older in a decade.

Flu viruses tend to mutate more quickly than others, and it's not unusual for multiple strains to be spreading at the same time. A new vaccine is formulated each year targeting the three strains expected to be the major threats. But that involves guesswork.

Because of these challenges, scientists tend to set a lower bar for flu vaccine. While childhood vaccines against diseases like measles are expected to be 90 or 95 percent effective, a flu vaccine that's 60 to 70 percent effective in the U.S. is considered pretty good.

By that standard, this year's vaccine is OK. The 56 percent effectiveness figure means people have a 56 percent lower chance of winding up at the doctor for treatment of flu symptoms.

For seniors, a flu vaccine is considered pretty good if it's in the 30 to 40 percent range, said Dr. Arnold Monto, a University of Michigan flu expert.

Older people have weaker immune systems that don't respond as well to flu shots. That's why a high-dose version was recently made available for those 65 and older. The new study was too small to show whether that made a difference this year.

The CDC estimates are based on about 2,700 people who got sick in December and January. The researchers traced back to see who had gotten flu shots and who hadn't. An earlier study put the vaccine's overall effectiveness slightly higher, at 62 percent.

The CDC's Bresee said there's a danger in providing preliminary results because it may result in people doubting — or skipping — flu shots. But the data was released to warn older people who got shots that they may still get sick and shouldn't ignore any serious flu-like symptoms, he said.

The new data highlights an evolution in how experts are evaluating flu vaccine effectiveness. For years, it was believed that if the viruses in the vaccine matched the ones spreading around the country, then the vaccine would be effective. This year's shot was a good match to the bugs going around this winter, including the harsher H3N2 that tends to make people sicker.

But the season proved to be a moderately severe one, with many illnesses occurring in people who'd been vaccinated.

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Online:

CDC report: http://www.cdc.gov/mmwr

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Wall Street extends losses, Nasdaq down 1 percent

DEAR ABBY: My boyfriend, "Doug" (24), and I (22) have been in a long-distance relationship for a year, but we were friends for a couple of years before that. I had never had a serious relationship before and lacked experience. Doug has not only been in two other long-term relationships, but has had sex with more than 15 women. One of them is an amateur porn actress.I knew about this, but it didn't bother me until recently. Doug had a party, and while he was drunk he told one of his buddies -- in front of me -- that he should watch a certain porn film starring his ex-girlfriend. ...

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IHT Rendezvous: Europe's Jobless Youth: Should the Old Make Way?

LONDON — A British minister has advised people aged over 60 to go to university and update their skills if they want to continue working.

With youth unemployment on the rise across Europe, it might seem an odd time to be encouraging older people to keep working rather than take a well-earned break and free up jobs for a younger generation.

But with pension funds in deficit and the number of over-60s on the rise, governments and individuals are under pressure to accept that a graying work force will have to work longer.

“There is nothing stopping older people applying for university,” David Willetts, Britain’s higher education minister, said this week. “If they can benefit from it, they should have that opportunity.”

The rules have been eased to allow people of any age to take out student loans to help finance their university education.

“If people need it in order to keep up to date with changes in their jobs, that is an opportunity they are going to take,” the Daily Telegraph quoted the minister as saying.

The advice comes at a time, however, when growing numbers of young Europeans are emigrating in order to find jobs that are unavailable at home.

“From Ireland to Greece, young Europeans are now the ones desperately seeking exit strategies from economies in free fall,” according to The Guardian.

László Andor, the European Union’s employment commissioner, recently quoted jobless figures indicating that 1 in 4 young people under 25 were out of work, a total of 5.7 million, in the 27 member states.

In a special report on Thursday the EurActiv Web site said the Continent faced a digital brain drain as a consequence of a generation of educated young people leaving Europe to seek work elsewhere.

It said the situation was particularly bad in southern states where unemployment was highest. In countries such as Spain, the mass exodus of young, educated people amounted to a brain drain “the likes of which has not been seen since the end of the Spanish Civil War in 1939.”

For those who stay at home — whether they are 25 or 65 — there is clearly no guarantee that university degrees will get them jobs.

When a British coffee chain recently advertised for staff at one of its new stores, it received 1,701 applications for just eight jobs. Among the rejected candidates were a number of jobless new graduates.

Should older people be encouraged to keep working? Or should they step aside to widen the job market for jobless newcomers? Tell us what you think.

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