Wall Street sours on weak domestic factory data

NEW YORK (Reuters) - Stocks struggled to extend the previous week's gains, dropping on Monday as disappointing U.S. factory numbers dampened optimism about China's economic growth.

The declines broke a three-day streak of gains for the S&P 500, keeping it shy of its 50-day moving average of about 1,420, a level that the index has been below since October 22, and now serving as a key resistance point for investors.

Manufacturing activity in the United States surprisingly contracted in November, the Institute for Supply Management said, dropping to its lowest level in more than three years. Economic data has been mixed in recent months, fanning worries about the pace of growth at a time when investors are already concerned about the "fiscal cliff" issue in Washington.

The ISM number "was below expectations that were already conservative, and that puts an exclamation point on the concern many of us have about the cliff's impact on the economy," said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York.

Markets had opened higher as output by China's factories grew in November for the first time in more than a year, data showed. Investors look to strength from China, the world's second-largest economy, to offset weak growth in the United States and Europe.

Still, the fiscal cliff remains investors' primary focus, with political haggling continuing over how to deal with large automatic spending cuts and tax hikes scheduled to kick in next year. The worry is that the combination of reduced spending and higher taxes could tip the U.S. economy back into recession.

While off its highs for the year, the S&P 500 is still up 12.1 percent for 2012.

"This could be the last opportunity for investors to take profits" after an unexpectedly strong year, said Grohowski, who helps oversee about $170 billion in assets.

Materials were the weakest sector on Monday, led lower by Newmont Mining after the company said its CEO resigned. Newmont's stock fell 3 percent to $45.69. Dow component DuPont dropped 1.7 percent to $42.39. An S&P materials index <.gspm> lost 1.8 percent.

The Dow Jones industrial average <.dji> fell 59.98 points, or 0.46 percent, to 12,965.60 at the close. The Standard & Poor's 500 Index <.spx> declined 6.72 points, or 0.47 percent, to 1,409.46. The Nasdaq Composite Index <.ixic> dropped 8.04 points, or 0.27 percent, to end at 3,002.20.

U.S. Treasury Secretary Timothy Geithner pushed Republicans on Sunday to offer specific ideas to cut the deficit. He predicted that they would agree to raise tax rates on the rich to obtain a year-end deal to avoid the fiscal cliff.

Among other factors serving to offset the ISM report on U.S. factories were two developments in the euro zone: Spain formally requested the disbursement of more than $50 billion of European funds to recapitalize its crippled banking sector, while Greece said it would spend 10 billion euros ($13 billion) to buy back bonds in a bid to reduce its ballooning debt.

The PHLX Europe sector index <.xex> added 0.1 percent.

Dell shares gained 4.4 percent to $10.06. The stock was one of the biggest percentage gainers in both the S&P 500 and Nasdaq 100 <.ndx> after Goldman Sachs upgraded the stock to "buy" from "sell.

Advanced Micro Devices was the S&P's top gainer, rising 7.3 percent to $2.36. Options traders appeared to be betting on further gains ahead. Early options order flow was focused on upside April calls, including a sweep of 3,594 April $3.50 strike calls for 16 cents per contract when the market was 14 cents to 16 cents, said WhatsTrading.com options strategist Frederic Ruffy.

Retail stocks were among the weakest of the day, with J.C. Penney Co off 3.2 percent at $17.36 and Staples Inc off 2.3 percent at $11.43. Consumer discretionary names tend to underperform during periods of economic uncertainty as consumers focus on core purchases.

Volume was light, with about 5.58 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, well below last year's daily average of 7.84 billion.

Decliners outnumbered advancers on the NYSE by a ratio of 3 to 2, while on the Nasdaq, about 14 stocks fell for every 11 that rose.

(Additional reporting by Doris Frankel; Editing by Jan Paschal)

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Israel says will stick with settlement plan despite condemnation

JERUSALEM (Reuters) - Israel rejected concerted criticism from the United States and Europe on Monday over Prime Minister Benjamin Netanyahu's decision to expand settlement building after the United Nations' de facto recognition of Palestinian statehood.

Washington urged Israel to reconsider its plan to erect 3,000 more homes in the occupied West Bank and East Jerusalem, saying the move hindered peace efforts with the Palestinians.

Britain, France, Spain, Sweden and Denmark summoned the Israeli ambassadors in their capitals to give similar messages.

An official in Netanyahu's office said Israel would not bend. "Israel will continue to stand by its vital interests, even in the face of international pressure, and there will be no change in the decision that was made," the official said.

Angered by the U.N. General Assembly's upgrading on Thursday of the Palestinians' status in the world body from "observer entity" to "non-member state", Israel said the next day it would build the new dwellings for settlers.

Such projects, on land Israel captured in a 1967 war, are considered illegal by most world powers and have routinely drawn condemnation from them. Approximately 500,000 Israelis and 2.5 million Palestinians live in the two areas.

In a shift that raised the alarm among Palestinians and in world capitals, Netanyahu's pro-settler government also ordered "preliminary zoning and planning work" for thousands of housing units in areas including the "E1" zone east of Jerusalem.

Such construction in the barren hills of E1 has never been put into motion in the face of opposition from Israel's main ally, the United States. Building in the area could bisect the West Bank, cut off Palestinians from Jerusalem and further dim their hopes for a contiguous state.

Israeli television stations reported Jerusalem's district planning commission would soon approve plans for several thousand more housing units, including more than 1,000 Israel had shelved two years ago after angering Washington by publishing the plans before a visit by Vice President Joe Biden.

The settlement plan, U.N. Secretary-General Ban Ki-moon said, would deal "an almost fatal blow" to a two-state solution to the Israeli-Palestinian conflict.

French President Francois Hollande said he was "extremely concerned" and Washington made clear it would not back such Israeli retaliation over the U.N. vote, sought by Palestinians after peace talks collapsed in 2010 over settlement building.

"We urge Israeli leaders to reconsider these unilateral decisions and exercise restraint as these actions are counterproductive and make it harder to resume direct negotiations to achieve a two state solution," White House spokesman Jay Carney told a briefing.

Ahead of a Netanyahu visit this week, Germany, considered Israel's closest ally in Europe, urged it to refrain from expanding settlements, and Russia said it viewed the Israeli moves with serious concern.

RETALIATION

Israeli Finance Minister Yuval Steinitz said Israel could not have remained indifferent to the Palestinians' unilateral move at the United Nations.

"I want to tell you that those same Europeans and Americans who are now telling us 'naughty, naughty' over our response, understand full-well that we have to respond, and they themselves warned the Palestinian Authority," he said.

Palestinian chief negotiator Saeb Erekat said building in E1 "destroys the two-state solution, (establishing) East Jerusalem as the capital of Palestine and practically ends the peace process and any opportunity to talk about negotiations in the future".

The United States, one of the eight countries to vote alongside Israel against the Palestinian resolution at the General Assembly, has said both were counterproductive to the resumption of direct peace talks.

In Europe, only the Czech Republic voted against the status upgrade while many countries, including France, backed it. Netanyahu plans to visit Prague this week to express his thanks.

In the Gaza Strip, Sami Abu Zuhri, spokesman for the governing Hamas Islamist movement, called the settlements "an insult to the international community, which should bear responsibility for Israeli violations and attacks on Palestinians".

Israeli police arrested three Jewish settlers on Monday whom they suspect of arson and other crimes against Palestinian property in the West Bank, including the torching of a car.

Attackers have often proclaimed they are exacting a "price tag" for steps taken against the settler movement by Palestinians, or by the Israeli government.

Alongside the settlement plans, Israel announced it would withhold about $100 million in Palestinian tax revenues from the Palestinian Authority, which exercises limited self-rule in the West Bank, saying Palestinians owed $200 million to Israeli firms.

"These are not steps towards peace, these are steps towards the extension of the conflict," Spanish Foreign Minister Jose Manuel Garcia-Margallo said.

Only three weeks ago, Netanyahu won strong European and U.S. support for a Gaza offensive that Israel said was aimed at curbing persistent cross-border rocket fire.

Favored by opinion polls to win a January 22 national election, he brushed off the condemnation and complaints at home that he is deepening Israel's diplomatic isolation.

Netanyahu told his cabinet on Sunday that his government "will carry on building in Jerusalem and in all the places on the map of Israel's strategic interests".

But while his housing minister has said the government would soon invite bids from contractors to build 1,000 homes for Israelis in East Jerusalem and more than 1,000 in West Bank settlement blocs, the E1 plan is still in its planning stages.

"No one will build until it is clear what will be done there," the minister, Ariel Attias, said on Sunday.

Israel froze much of its activities in E1 under pressure from former U.S. President George W. Bush, and the area has been under the scrutiny of his successor, Barack Obama.

Israel cites historical and Biblical links to the West Bank and Jerusalem and regards all of the holy city as its capital, a claim that is not recognized internationally.

(Additional reporting by Crispian Balmer, Dan Williams, Nidal al-Mughrabi in Gaza, Jihan Abdalla in Ramallah, Steve Gutterman in Moscow, Gareth Jones in Berlin, John Irish and Elizabeth Pineau in Paris and Tim Castle in London; writing by Jeffrey Heller; editing by Philippa Fletcher)

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Ericsson seeks U.S. import ban on Samsung products

STOCKHOLM (Reuters) – Swedish telecoms gear maker Ericsson has filed a request with the U.S. International Trade Commission to ban U.S. imports of products made by South Korean group Samsung,

The request from Ericsson, which said on Monday the products infringe on its patents, came after it sued Samsung for patent infringement in a U.S. court last week.

“The request for an import ban is a part of the process. An import ban is not our goal. Our goal is that they (Samsung) sign license agreements on reasonable terms,” spokesman Fredrik Hallstan said.

Ericsson said last week it was suing Samsung after talks failed to reach agreement on terms that were fair, reasonable and non-discriminatory (FRAND) over patents.

Samsung said it would defend itself against the lawsuit, adding that Ericsson had asked for “prohibitively higher royalty rates to renew the same patent portfolio”.

(Reporting by Sven Nordenstam; Editing by Dan Lalor)

Tech News Headlines – Yahoo! News

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Kristin Chenoweth Dating Jake Pavelka

By Patrick Gomez

12/03/2012 at 04:40 PM EST

Kristin Chenoweth and Jake Pavelka

FilmMagic (2)

Everything appears to be rosy between Kristin Chenoweth and her new beau Jake Pavelka.

"We have been spending a little time together," Chenoweth tells PEOPLE of her dates with the former Bachelor star.

The actress, 44, met her new man, 34, at an event in October and it was not long before the couple was spotted dining together in West Hollywood as well as more recently at a cafe near Pavelka's home in Texas.

Squeezing dates into her busy schedule has proven difficult in the past, admits Chenoweth, who performed at an Audi-sponsored Trevor Project event Sunday, and is currently rehearsing to co-host the American Country Awards, airing Monday, Dec. 10 on Fox.

"A lot of people know that I got hurt in July," says Chenoweth of suffering a head injury while filming The Good Wife. "I am doing so much better but I think it slowed me down and I've realized life is short. I want to do things that make me happy."

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Fossil fuel subsidies in focus at climate talks

DOHA, Qatar (AP) — Hassan al-Kubaisi considers it a gift from above that drivers in oil- and gas-rich Qatar only have to pay $1 per gallon at the pump.

"Thank God that our country is an oil producer and the price of gasoline is one of the lowest," al-Kubaisi said, filling up his Toyota Land Cruiser at a gas station in Doha. "God has given us a blessing."

To those looking for a global response to climate change, it's more like a curse.

Qatar — the host of U.N. climate talks that entered their final week Monday — is among dozens of countries that keep gas prices artificially low through subsidies that exceeded $500 billion globally last year. Renewable energy worldwide received six times less support — an imbalance that is just starting to earn attention in the divisive negotiations on curbing the carbon emissions blamed for heating the planet.

"We need to stop funding the problem, and start funding the solution," said Steve Kretzmann, of Oil Change International, an advocacy group for clean energy.

His group presented research Monday showing that in addition to the fuel subsidies in developing countries, rich nations in 2011 gave more than $58 billion in tax breaks and other production subsidies to the fossil fuel industry. The U.S. figure was $13 billion.

The Paris-based Organization for Economic Cooperation and Development has calculated that removing fossil fuel subsidies could reduce carbon emissions by more than 10 percent by 2050.

Yet the argument is just recently gaining traction in climate negotiations, which in two decades have failed to halt the rising temperatures that are melting Arctic ice, raising sea levels and shifting weather patterns with impacts on droughts and floods.

In Doha, the talks have been slowed by wrangling over financial aid to help poor countries cope with global warming and how to divide carbon emissions rights until 2020 when a new planned climate treaty is supposed to enter force. Calls are now intensifying to include fossil fuel subsidies as a key part of the discussion.

"I think it is manifestly clear ... that this is a massive missing piece of the climate change jigsaw puzzle," said Tim Groser, New Zealand's minister for climate change.

He is spearheading an initiative backed by Scandinavian countries and some developing countries to put fuel subsidies on the agenda in various forums, citing the U.N. talks as a "natural home" for the debate.

The G-20 called for their elimination in 2009, and the issue also came up at the U.N. earth summit in Rio de Janeiro earlier this year. Frustrated that not much has happened since, European Union climate commissioner Connie Hedegaard said Monday she planned to raise the issue with environment ministers on the sidelines of the talks in Doha.

Many developing countries are positive toward phasing out fossil fuel subsidies, not just to protect the climate but to balance budgets. Subsidies introduced as a form of welfare benefit decades ago have become an increasing burden to many countries as oil prices soar.

"We are reviewing the subsidy periodically in the context of the total economy for Qatar," the tiny Persian gulf country's energy minister, Mohammed bin Saleh al-Sada, told reporters Monday.

Qatar's National Development Strategy 2011-2016 states it more bluntly, saying fuel subsides are "at odds with the aspirations" and sustainability objectives of the wealthy emirate.

The problem is that getting rid of them comes with a heavy political price.

When Jordan raised fuel prices last month, angry crowds poured into the streets, torching police cars, government offices and private banks in the most sustained protests to hit the country since the start of the Arab unrest. One person was killed and 75 others were injured in the violence.

Nigeria, Indonesia, India and Sudan have also seen violent protests this year as governments tried to bring fuel prices closer to market rates.

Iran has used a phased approach to lift fuel subsidies over the past several years, but its pump prices remain among the cheapest in the world.

"People perceive it as something that the government is taking away from them," said Kretzmann. "The trick is we need to do it in a way that doesn't harm the poor."

The International Energy Agency found in 2010 that fuel subsidies are not an effective measure against poverty because only 8 percent of such subsidies reached the bottom 20 percent of income earners.

The IEA, which only looked at consumption subsidies, this year said they "remain most prevalent in the Middle East and North Africa, where momentum toward their reform appears to have been lost."

In the U.S., environmental groups say fossil fuel subsidies include tax breaks, the foreign tax credit and the credit for production of nonconventional fuels.

Industry groups, like the Independent Petroleum Association of America, are against removing such support, saying that would harm smaller companies, rather than the big oil giants.

In Doha, Mohammed Adow, a climate activist with Christian Aid, called all fuel subsidies "reckless and dangerous," but described removing subsidies on the production side as "low-hanging fruit" for governments if they are serious about dealing with climate change.

"It's going to oil and coal companies that don't need it in the first place," he said.

___

Associated Press writers Abdullah Rebhy in Doha, Qatar, and Brian Murphy in Dubai, United Arab Emirates, contributed to this report

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Karl Ritter can be reached at www.twitter.com/karl_ritter

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Islamist protest shuts down Egypt's top court

CAIRO (Reuters) - Protests by Islamists allied to President Mohamed Mursi forced Egypt's highest court to adjourn its work indefinitely on Sunday, intensifying a conflict between some of the country's top judges and the head of state.

The Supreme Constitutional Court said it would not convene until its judges could operate without "psychological and material pressure", saying protesters had stopped the judges from reaching the building.

Several hundred Mursi supporters had protested outside the court through the night ahead of a session expected to examine the legality of parliament's upper house and the assembly that drafted a new constitution, both of them Islamist-controlled.

The cases have cast a legal shadow over Mursi's efforts to chart a way out of a crisis ignited by a November 22 decree that temporarily expanded his powers and led to nationwide protests.

The court's decision to suspend its activities appeared unlikely to have any immediate impact on Mursi's drive to get the new constitution passed in a national referendum on December 15.

Judges supervise voting in Egypt, and Mursi will need them to oversee the referendum.

But in a blow to the president, the Judges' Club, an influential society representing the nation's judges, decided on Sunday not to oversee the vote, the state news agency reported. The club's decisions are not binding on members, however.

Vice President Mahmoud Mekky said on Sunday he was confident the judges would perform that role, despite calls by Mursi's critics in the judiciary for a boycott.

Three people have been killed and hundreds wounded in protests and counter-demonstrations over Mursi's decree.

At least 200,000 of Mursi's supporters attended a rally at Cairo University on Saturday. His opponents are staging an open-ended sit-in in Cairo's Tahrir Square, the cradle of the uprising that toppled Hosni Mubarak in February 2011.

Mursi and the Muslim Brotherhood, which propelled him to power in a June election, hope to end the crisis by pushing through the new constitution hastily adopted by the drafting assembly on Friday. The next day the assembly handed the text to Mursi, who called the referendum and urged Egyptians to vote.

"The Muslim Brotherhood is determined to go ahead with its own plans regardless of everybody else. There is no compromise on the horizon," said Hassan Nafaa, a professor of political science at Cairo University.

Outside the Supreme Constitutional Court, Muslim Brotherhood supporters rallied behind the referendum date. "Yes to the constitution", declared a banner held aloft by one protester. Chants demanded the "purging of the judiciary".

The interior minister told the head of the court that the building was accessible and the protests were peaceful, according a statement from the ministry.

The protest reflected the deep suspicion harbored by Egypt's Islamists towards a court they see as a vestige of the Mubarak era. The same court ruled in June to dissolve the Muslim Brotherhood-led lower house of parliament.

Since then, several legal cases have challenged the legitimacy of the upper house of parliament and the 100-member constituent assembly that wrote the constitution.

Those against the upper house have focused on the legality of the law by which it was elected, while the constitutional assembly has faced a raft of court cases alleging that the way it was picked was illegal.

STOCK MARKET RALLIES

Mursi believes that securing approval for the new constitution in a popular referendum will bury all arguments on the legality of the constituent assembly, as well as controversy over the text it worked through the night to finish on Friday.

It will also override the November 22 decree that drew concern from Western governments and a rebellion by sections of the judiciary. The decree shielded Mursi from judicial oversight.

While the Islamists' critics, including representatives of the Christian minority, have accused the Brotherhood of trying to hijack the constitution, investors appear to have seen Mursi's moves as a harbinger of stability. They were also relieved that Saturday's mass Islamist protest went off calmly.

The main stock market index, which lost a tenth of its value in response to Mursi's November 22 decree, rallied more than 2 percent when the market opened on Sunday.

"The events that took place through the weekend, from the approval of the final draft of the constitution and the president calling a referendum, gave some confidence to investors that political stability is on track," said Mohamed Radwan of Pharos Securities, an Egyptian brokerage.

But the political opposition, made up of leftist, liberal and socialist parties, have been infuriated by what they see as the Brotherhood's attempt to ram through a constitution that does not enjoy national consensus.

Mursi's opponents warn of deeper polarization ahead.

"LET EVERYONE HAVE THEIR SAY"

Leading opposition figure Mohamed ElBaradei said on Twitter that the "struggle will continue" over a draft constitution that "undermines basic freedoms".

Liberal figures, including former Arab League chief Amr Moussa, pulled out of the constituent assembly last month, as did Christian representatives.

The draft constitution contains Islamist-flavored language which opponents say could be used to whittle away human rights and stifle criticism. It forbids blasphemy and "insults to any person", does not explicitly uphold women's rights and demands respect for "religion, traditions and family values".

The New York-based Human Rights Watch said it protected some rights while undermining others.

The text limits presidents to two four-year terms, requires parliamentary approval for their choice of prime minister, and introduces some civilian oversight of the military - although not enough for critics. Mubarak ruled for three decades.

Mursi described it as a constitution that fulfilled the goals of the revolution that ended Mubarak's rule. "Let everyone -- those who agree and those who disagree -- go to the referendum to have their say," he said.

The Islamists are gambling that they will be able to secure a "yes" vote by mobilizing their core support base.

Nafaa of Cairo University said the constitution would likely be approved by a slim majority. "But in this case, how can you run a country with a disputed constitution - a constitution not adopted by consensus?" he asked.

(Writing by Tom Perry; Editing by Alistair Lyon and Roger Atwood)

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Angry Birds Star Wars updated with 20 additional levels, Princess Leia cameo

Rovio on Thursday updated its immensely popular Angry Birds Star Wars game to include 20 additional levels. The latest game in the bird-slinging franchise was released earlier this month and was an instant hit, topping the iTunes App Store in less than three hours. In the most recent update, gamers must help the birds escape from the AT-ATs and Pigtroopers on the remote ice world of Hoth. Luckily, the rebel birds have a secret weapon — Princess Leia.

“It is a dark time for the Rebellion,” Rovio wrote on its website. ”Evading the dreaded Imperial Starfleet, a group of freedom fighters has established a new secret base on the remote ice world of Hoth. Unfortunately the evil Lord Vader discovers their hideout, and the desperate Rebel birds must escape the AT-ATs and Pigtroopers hot on their trail. But the Rebels have an ace up their sleeve with the debut of PRINCESS LEIA and her attractive new power!”

Angry Birds Star Wars is available for Android, iOS, Macs and PCs. The Hoth trailer follows below.

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Gaming News Headlines – Yahoo! News

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Lady Gaga Goes on Safari in South Africa

By Maggie Coughlan

12/02/2012 at 04:15 PM EST

As if Lady Gaga could get any more wild, she recently embarked on a safari while touring in South Africa.

Gaga – who surprised fans in Rio de Janeiro by playing soccer with neighborhood children earlier this month – took to Twitter to share her excitement over a pride of lions.

"SAFARI PICTURE: in this photo I'm about 10 feet from 13 lions, 2 cubs. I spent about 30 minutes w them and took a nap!" she Tweeted on Saturday, revealing a hat modified to fit her high ponytail.

"& yes I cut a hole in my bush hat so my pony could stick out," she later told her followers. "#SafariBarbie #Glambi my scarf was a gift from the Princess of Monaco, thanku!"

The singer, 26, is scheduled to perform at the Cape Town Stadium on Monday and raved about her experience in South Africa.

"Johannesburg was so wonderful, I can't really put it into words. Im so happy, I haven't slept yet. Laying in bed dreaming of the next tour," she Tweeted on Sunday.

Gaga is touring through March 2013.

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Cliff fight may knock out December rally

NEW YORK (Reuters) - In normal times, next week's slew of U.S. economic data could be a springboard for a December rally in the stock market.

December is historically a strong month for markets. The S&P 500 has risen 16 times in the past 20 years during the month.

But the market hasn't been operating under normal circumstances since November 7 when a day after the U.S. election, investors' focus shifted squarely to the looming "fiscal cliff."

Investors are increasingly nervous about the ability of lawmakers to undo the $600 billion in tax increases and spending cuts that are set to begin in January; those changes, if they go into effect, could send the U.S. economy into a recession.

A string of economic indicators next week, which includes a key reading of the manufacturing sector on Monday, culminates with the November jobs report on Friday.

But the impact of those economic reports could be muted. Distortions in the data caused by Superstorm Sandy are discounted.

The spotlight will be more firmly on signs from Washington that politicians can settle their differences on how to avoid the fiscal cliff.

"We have a week with a lot of economic data, and obviously most of the economic data is going to reflect the effects of Sandy, and that might be a little bit negative for the market next week, but most of that is already expected - the main focus remains the fiscal cliff," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

Concerns about the cliff sent the S&P 500 <.spx> into a two-week decline after the elections, dropping as much as 5.3 percent, only to rally back nearly 4 percent as the initial tone of talks offered hope that a compromise could be reached and investors snapped up stocks that were viewed as undervalued.

On Wednesday, the S&P 500 gained more than 20 points from its intraday low after House Speaker John Boehner said he was optimistic that a budget deal to avoid big spending cuts and tax hikes could be worked out. The next day, more pessimistic comments from Boehner, an Ohio Republican, briefly wiped out the day's gains in stocks.

On Friday, the sharp divide between the Democrats and the Republicans on taxes and spending was evident in comments from President Barack Obama, who favors raising taxes on the wealthy, and Boehner, the top Republican in Congress, who said Obama's plan was the wrong approach and declared that the talks had reached a stalemate.

"It's unusual to end up with one variable in this industry, it's unusual to have a single bullet that is the causal factor effect, and you are sitting here for the next maybe two weeks or more, on that kind of condition," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago.

"And that is what is grabbing the markets."

BE CONTRARY AND MAKE MERRY

But investor attitudes and seasonality could also help spur a rally for the final month of the year.

The most recent survey by the American Association of Individual Investors reflected investor caution about the cliff. Although bullish sentiment rose above 40 percent for the first time since August 23, bearish sentiment remained above its historical average of 30.5 percent for the 14th straight week.

December is a critical month for retailers such as Target Corp and Macy's Inc . They saw monthly retail sales results dented by Sandy, although the start of the holiday shopping season fared better.

With consumer spending making up roughly 70 percent of the U.S. economy, a solid showing for retailers during the holiday season could help fuel any gains.

Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, believes the recent drop after the election could be a market bottom, with sentiment leaving stocks poised for a December rally.

"The concerns on the fiscal cliff - as valid as they might be - could be overblown. When you look at a lot of the overriding sentiment, that has gotten extremely negative," said Detrick.

"From that contrarian point of view with the historically bullish time frame of December, we once again could be setting ourselves up for a pretty nice end-of-year rally, based on lowered expectations."

SOME FEEL THE BIG CHILL

Others view the fiscal cliff as such an unusual event that any historical comparisons should be thrown out the window, with a rally unlikely because of a lack of confidence in Washington to reach an agreement and the economic hit caused by Sandy.

"History doesn't matter. You're dealing with an extraordinary set of circumstances that could very well end up in the U.S. economy going into a recession," said Phil Orlando, chief equity market strategist at Federated Investors in New York.

"And the likelihood of that is exclusively in the hands of our elected officials in Washington. They could absolutely drag us into a completely voluntary recession."

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: charles.mikolajczak(at)thomsonreuters.com )

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Egypt's Mursi calls referendum as Islamists march

CAIRO (Reuters) - Egypt's President Mohamed Mursi called a December 15 referendum on a draft constitution on Saturday as at least 200,000 Islamists demonstrated in Cairo to back him after opposition fury over his newly expanded powers.

Speaking after receiving the final draft of the constitution from the Islamist-dominated assembly, Mursi urged a national dialogue as the country nears the end of the transition from Hosni Mubarak's rule.

"I renew my call for opening a serious national dialogue over the concerns of the nation, with all honesty and impartiality, to end the transitional period as soon as possible, in a way that guarantees the newly-born democracy," Mursi said.

Mursi plunged Egypt into a new crisis last week when he gave himself extensive powers and put his decisions beyond judicial challenge, saying this was a temporary measure to speed Egypt's democratic transition until the new constitution is in place.

His assertion of authority in a decree issued on November 22, a day after he won world praise for brokering a Gaza truce between Israel and the Palestinian Islamist Hamas movement, dismayed his opponents and widened divisions among Egypt's 83 million people.

Two people have been killed and hundreds wounded in protests by disparate opposition forces drawn together and re-energized by a decree they see as a dictatorial power grab.

A demonstration in Cairo to back the president swelled through the afternoon, peaking in the early evening at least 200,000, said Reuters witnesses, basing their estimates on previous rallies in the capital. The authorities declined to give an estimate for the crowd size.

"The people want the implementation of God's law," chanted flag-waving demonstrators, many of them bussed in from the countryside, who choked streets leading to Cairo University, where Mursi's Muslim Brotherhood had called the protest.

Tens of thousands of Egyptians had protested against Mursi on Friday. "The people want to bring down the regime," they chanted in Cairo's Tahrir Square, echoing the trademark slogan of the revolts against Hosni Mubarak and Arab leaders elsewhere.

Rival demonstrators threw stones after dark in the northern city of Alexandria and a town in the Nile Delta. Similar clashes erupted again briefly in Alexandria on Saturday, state TV said.

"COMPLETE DEFEAT"

Mohamed Noshi, 23, a pharmacist from Mansoura, north of Cairo, said he had joined the rally in Cairo to support Mursi and his decree. "Those in Tahrir don't represent everyone. Most people support Mursi and aren't against the decree," he said.

Mohamed Ibrahim, a hardline Salafi Islamist scholar and a member of the constituent assembly, said secular-minded Egyptians had been in a losing battle from the start.

"They will be sure of complete popular defeat today in a mass Egyptian protest that says 'no to the conspiratorial minority, no to destructive directions and yes for stability and sharia (Islamic law)'," he told Reuters.

Mursi has alienated many of the judges who must supervise the referendum. His decree nullified the ability of the courts, many of them staffed by Mubarak-era appointees, to strike down his measures, although says he respects judicial independence.

A source at the presidency said Mursi might rely on the minority of judges who support him to supervise the vote.

"Oh Mursi, go ahead and cleanse the judiciary, we are behind you," shouted Islamist demonstrators in Cairo.

Mursi, once a senior Muslim Brotherhood figure, has put his liberal, leftist, Christian and other opponents in a bind. If they boycott the referendum, the constitution would pass anyway.

If they secured a "no" vote to defeat the draft, the president could retain the powers he has unilaterally assumed.

And Egypt's quest to replace the basic law that underpinned Mubarak's 30 years of army-backed one-man rule would also return to square one, creating more uncertainty in a nation in dire economic straits and seeking a $4.8 billion loan from the IMF.

"NO PLACE FOR DICTATORSHIP"

Mursi's well-organized Muslim Brotherhood and its ultra-orthodox Salafi allies, however, are convinced they can win the referendum by mobilizing their own supporters and the millions of Egyptians weary of political turmoil and disruption.

"There is no place for dictatorship," the president said on Thursday while the constituent assembly was still voting on a draft constitution which Islamists say enshrines Egypt's new freedoms.

Human rights groups have voiced misgivings, especially about articles related to women's rights and freedom of speech.

The text limits the president to two four-year terms, requires him to secure parliamentary approval for his choice of prime minister, and introduces a degree of civilian oversight over the military - though not enough for critics.

The draft constitution also contains vague, Islamist-flavored language that its opponents say could be used to whittle away human rights and stifle criticism.

For example, it forbids blasphemy and "insults to any person", does not explicitly uphold women's rights and demands respect for "religion, traditions and family values".

The draft injects new Islamic references into Egypt's system of government but retains the previous constitution's reference to "the principles of sharia" as the main source of legislation.

"We fundamentally reject the referendum and constituent assembly because the assembly does not represent all sections of society," said Sayed el-Erian, 43, a protester in Tahrir and member of a party set up by opposition figure Mohamed ElBaradei.

Several independent newspapers said they would not publish on Tuesday in protest. One of the papers also said three private satellite channels would halt broadcasts on Wednesday.

Egypt cannot hold a new parliamentary election until a new constitution is passed. The country has been without an elected legislature since the Supreme Constitutional Court ordered the dissolution of the Islamist-dominated lower house in June.

The court is due to meet on Sunday to discuss the legality of parliament's upper house.

"We want stability. Every time, the constitutional court tears down institutions we elect," said Yasser Taha, a 30-year-old demonstrator at the Islamist rally in Cairo.

(Additional reporting by Marwa Awad, Yasmine Saleh and Tom Perry; Editing by Myra MacDonald and Jason Webb)

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