Wall Street Week Ahead: A lump of coal for "Fiscal Cliff-mas"

NEW YORK (Reuters) - Wall Street traders are going to have to pack their tablets and work computers in their holiday luggage after all.

A traditionally quiet week could become hellish for traders as politicians in Washington are likely to fall short of an agreement to deal with $600 billion in tax hikes and spending cuts due to kick in early next year. Many economists forecast that this "fiscal cliff" will push the economy into recession.

Thursday's debacle in the U.S. House of Representatives, where Speaker John Boehner failed to secure passage of his own bill that was meant to pressure President Obama and Senate Democrats, only added to worry that the protracted budget talks will stretch into 2013.

Still, the market remains resilient. Friday's decline on Wall Street, triggered by Boehner's fiasco, was not enough to prevent the S&P 500 from posting its best week in four.

"The markets have been sort of taking this in stride," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago, which has about $38 billion in assets under management.

"The markets still basically believe that something will be done," he said.

If something happens next week, it will come in a short time frame. Markets will be open for a half-day on Christmas Eve, when Congress will not be in session, and will close on Tuesday for Christmas. Wall Street will resume regular stock trading on Wednesday, but volume is expected to be light throughout the rest of the week with scores of market participants away on a holiday break.

For the week, the three major U.S. stock indexes posted gains, with the Dow Jones industrial average <.dji> up 0.4 percent, the S&P 500 <.spx> up 1.2 percent and the Nasdaq Composite Index <.ixic> up 1.7 percent.

Stocks also have booked solid gains for the year so far, with just five trading sessions left in 2012: The Dow has advanced 8 percent, while the S&P 500 has climbed 13.7 percent and the Nasdaq has jumped 16 percent.

IT COULD GET A LITTLE CRAZY

Equity volumes are expected to fall sharply next week. Last year, daily volume on each of the last five trading days dropped on average by about 49 percent, compared with the rest of 2011 - to just over 4 billion shares a day exchanging hands on the New York Stock Exchange, the Nasdaq and NYSE MKT in the final five sessions of the year from a 2011 daily average of 7.9 billion.

If the trend repeats, low volumes could generate a spike in volatility as traders keep track of any advance in the cliff talks in Washington.

"I'm guessing it's going to be a low volume week. There's not a whole lot other than the fiscal cliff that is going to continue to take the headlines," said Joe Bell, senior equity analyst at Schaeffer's Investment Research, in Cincinnati.

"A lot of people already have a foot out the door, and with the possibility of some market-moving news, you get the possibility of increased volatility."

Economic data would have to be way off the mark to move markets next week. But if the recent trend of better-than-expected economic data holds, stocks will have strong fundamental support that could prevent selling from getting overextended even as the fiscal cliff negotiations grind along.

Small and mid-cap stocks have outperformed their larger peers in the last couple of months, indicating a shift in investor sentiment toward the U.S. economy. The S&P MidCap 400 Index <.mid> overcame a technical level by confirming its close above 1,000 for a second week.

"We view the outperformance of the mid-caps and the break of that level as a strong sign for the overall market," Schaeffer's Bell said.

"Whenever you have flight to risk, it shows investors are beginning to have more of a risk appetite."

Evidence of that shift could be a spike in shares in the defense sector, expected to take a hit as defense spending is a key component of the budget talks.

The PHLX defense sector index <.dfx> hit a historic high on Thursday, and far outperformed the market on Friday with a dip of just 0.26 percent, while the three major U.S. stock indexes finished the day down about 1 percent.

Following a half-day on Wall Street on Monday ahead of the Christmas holiday, Wednesday will bring the S&P/Case-Shiller Home Price Index. It is expected to show a ninth-straight month of gains.

U.S. jobless claims on Thursday are seen roughly in line with the previous week's level, with the forecast at 360,000 new filings for unemployment insurance, compared with the previous week's 361,000.

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

(Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Falcons top Lions 31-18 for home-field advantage

DETROIT (AP) — Matt Ryan got what he wanted.

Calvin Johnson was forced to settle for what he could get.

Ryan matched a career high with four touchdown passes, two to Roddy White, to help the Atlanta Falcons beat the Detroit Lions 31-18 Saturday night and earn home-field advantage throughout the NFC playoffs.

"It's great," Ryan said. "Our confidence is high and our experience — good and bad — has helped us. The key is to keep the focus where it's been."

In yet another loss, Johnson had a record-breaking night.

Johnson broke Jerry Rice's NFL single-season yards receiving mark of 1,848. After making the record-breaking catch in the fourth quarter, Johnson jogged over to the sideline and handed the football to his father.

"That was a very special moment," he said.

Johnson also became the only player with 100 yards receiving in eight straight games and the first with 10 receptions in four games in a row in league history. He had 11 receptions for 225 yards, giving him 1,892 this season.

"I've been an NFL fan my whole life, dating back to watching Johnny Unitas and Raymond Berry as a kid, and I've coached in this league for 19 years," Detroit coach Jim Schwartz said. "I've seen a lot of Hall of Famers, but I've never seen a better player than Calvin Johnson.

"He just broke a record set by Jerry Rice, who is arguably the best player in this history of this league."

The Falcons (13-2) pulled away with Ryan's fourth TD pass to wide-open tight end Michael Palmer in the fourth quarter and Matt Bryant's 20-yard field goal with 3:05 left that gave them a 15-point lead.

Ryan was 25 of 32 for 279 yards without a turnover.

The Falcons hope playing at home, potentially throughout the conference playoffs, helps them more than it did after the 2010 and 1980 seasons. The Falcons failed to win a game in either postseason, getting routed by Green Bay two years ago and blowing a double-digit, fourth-quarter lead to Dallas three decades ago.

Atlanta advanced to its only Super Bowl with a win at Minnesota after winning a franchise-record 14 games during the 1998 season.

The Falcons won't have much incentive to match that mark next week at home against Tampa Bay, when they'll have nothing to gain and something to lose if a key player or more gets hurt.

Detroit (4-11) has been relegated to playing for pride this month and that hasn't been going very well.

The Lions, whose seven-game losing streak is the longest skid in the league, haven't struggled this much since the laughingstock of a franchise became the league's first to go 0-16 in 2008.

The Falcons led 21-3 at halftime before letting the Lions pull within five points early in the fourth quarter.

Ryan dashed Detroit's comeback hopes.

Facing intense pressure, he converted a third down in Atlanta territory with a pass to White, picked on rookie cornerback Jonte Green by throwing to Jones to pick up more first downs and found Tony Gonzalez open to convert another third down to set up his fourth TD pass.

"We didn't play well in the third quarter," Atlanta coach Mike Smith said. "Matt made some big throws on that drive."

Stafford was clearly trying to get the ball to Johnson on the next drive and cornerback Asante Samuel figured that out, stepping in front of the receiver for an interception to set up Bryant's field goal.

Atlanta running back Michael Turner was tackled in the end zone, after Detroit turned the ball over on downs, to give the Lions two meaningless points.

Ryan went deep to White for the first score, connecting with him on a 44-yard TD strike with 5:50 left in the first quarter. Ryan threw a short pass to him early in the second quarter and the standout receiver did the rest on a 39-yard sprint down the sideline.

Ryan put his third TD pass where only Julio Jones could catch it a corner of the end zone, and he did on a 16-yard reception that put Atlanta up 21-3.

Detroit didn't give up, a game after being accused of doing just that in a 38-10 loss at Arizona.

Jason Hanson kicked a second field goal late in the first half to make it 21-6.

After Atlanta opened the second half with a three-and-out drive, Mikel Leshoure scored on a 1-yard run midway through the third quarter to pull the Lions with eight points.

Hanson's third field goal made it 21-16.

Stafford finished 37 of 56 for 443 yards with an interception and the Lions say he set an NFL record for the most yards passing in a game without throwing a TD pass.

Detroit dug a big hole because the Falcons scored two TDs off turnovers in the first half.

Defensive end Kroy Biermann forced running Leshoure to fumble, giving the Falcons the ball at their 31 and they took advantage. Ryan's perfectly lofted pass to White's fingertips converted a third-and-1 in a big way, putting the Falcons ahead.

The Lions responded with another drive into Atlanta territory, but stalled and had to settle for Hanson's 34-yard field goal in the final minute of the opening quarter to pull within four points.

Atlanta earned a double-digit lead on the ensuing drive.

Ryan threw a screen pass to his left to White, who got a great block from tight end Gonzalez, and the receiver raced untouched for a score that put the Falcons ahead 14-3.

White finished with eight receptions for 153 yards and two TDs. Jones had seven receptions for 71 yards and a score.

Ryan completed his first 12 attempts and, after his first incomplete pass, he converted a third-and-10 with an 11-yard toss to Jacquizz Rodgers. Two plays later, Ryan matched a season high with a third TD pass on the connection with Jones. Prior to the game, Ryan hadn't started a game with more than 10 consecutive completions, according to STATS LLC. He started 10 for 10 last month against Tampa Bay.

Johnson had three receptions for 70 yards in the first quarter, breaking Herman Moore's single-season franchise record for yards receiving.

By halftime, Johnson had 117 yards receiving. He had 100 yards receiving for an eighth straight game, breaking a record set by Charley Hennigan in 1961 and matched by Michael Irvin in 1995. It was Johnson's 11th game with 100 yards receiving this season, tying Irvin's NFL mark.

"Calvin is one of the best players in the game and I think everybody is a big fan of his," Ryan said. "He's one of the most genuinely nice people you could meet."

Stafford connected with Johnson on a short crossing route and the receiver did the rest, outrunning Falcons on a 49-yard gain. Fittingly, the Lions turned the ball over on the next snap in the latest lowlight in a season full of them.

The Lions, Falcons and fans at Ford Field in Detroit honored the victims of the shootings at Sandy Hook Elementary School before the game. Players had memorial decals on their helmets that read "S.H.E.S." in white on a black background, and Detroit's coaches wore pins with a similar design. There was also a moment of silence before the national anthem while the names and ages of each victim were shown on the videoboards. Twenty children and six adults were killed in the Dec. 14 shooting in Newtown, Conn. Adam Lanza killed his mother, shot students and staff, then killed himself.

NOTES: Stafford, in his fourth season, has 1,090 career completions to surpass Bobby Layne's franchise record of 1,074. Stafford is seven attempts away from surpassing the NFL's single-season mark of 691 set by Drew Bledsoe with New England in 1994. ... Backup Falcons CB Christopher Owens had a hamstring injury.

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Online: http://pro32.ap.org/poll and http://twitter.com/AP_NFL

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Follow Larry Lage on Twitter: http://twitter.com/larrylage

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Senators slam movie's torture scenes

In the new film "Zero Dark Thirty," Jessica Chastain plays a CIA analyst who is part of the team hunting Osama bin Laden.

STORY HIGHLIGHTS

• Sens. Feinstein, McCain, Levin send letter calling new film "grossly inaccurate"


• Letter adds to controversy over depiction of torture as a key to finding bin Laden, Bergen says


• Senate committee has approved 6,000-page classified report on CIA interrogations program


• Bergen says as much as possible of that report should be released to the public

Editor's note: Peter Bergen is a CNN national security analyst and author of "Manhunt: The Ten-Year Search for bin Laden, from 9/11 to Abbottabad."

(CNN) -- On Wednesday, three senior U.S. senators sent Michael Lynton, the CEO of Sony Pictures, a letter about "Zero Dark Thirty," the much-discussed new movie about the hunt for Osama bin Laden, which described the film as "grossly inaccurate and misleading."

In the letter, Senate Intelligence Committee Chairman Dianne Feinstein, D-California, Senate Armed Services Committee Chairman Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona, expressed their "deep disappointment" in the movie's depiction of CIA officers torturing prisoners, which "credits these detainees with providing critical lead information" about the courier who led the CIA to bin Laden's hiding place in northern Pakistan.

The senators point out that the filmmakers of "Zero Dark Thirty" open the movie with the words that it is "based on first-hand accounts of actual events." The film then goes on, the senators say, to give the clear implication "that the CIA's coercive interrogation techniques were effective in eliciting important information related to a courier for Usama Bin Laden."

Review: 'Zero Dark Thirty' is utterly gripping

Peter Bergen

The senators write that this is not supported by the facts: "We have reviewed CIA records and know that this is incorrect."

Last week, the Senate Intelligence Committee voted to sign off on the findings of its three-year study of the CIA's detention and interrogation program, during the course of which the committee's staff reviewed more than 6 million pages of records about the program.

Based on the findings of that review, Sens. Feinstein and Levin had released a statement eight months ago that said, "The CIA did not first learn about the existence of the Usama Bin Laden courier from CIA detainees subjected to coercive interrogation techniques. Nor did the CIA discover the courier's identity from detainees subjected to coercive techniques. ... Instead, the CIA learned of the existence of the courier, his true name and location through means unrelated to the CIA detention and interrogation program."

In their letter to Sony, the three senators write, "(W)ith the release of Zero Dark Thirty, the filmmakers and your production studio are perpetuating the myth that torture is effective. ... We believe that you have an obligation to state that the role of torture in the hunt for Usama Bin Laden is not based on the facts."

Requests from Sony Pictures for comment on the senators' letter yielded a response referring to a statement that the film's director Kathryn Bigelow and screenwriter Mark Boal had released last week:

"This was a 10-year intelligence operation brought to the screen in a two-and-a-half-hour film. We depicted a variety of controversial practices and intelligence methods that were used in the name of finding bin Laden. The film shows that no single method was necessarily responsible for solving the manhunt, nor can any single scene taken in isolation fairly capture the totality of efforts the film dramatizes. One thing is clear: the single greatest factor in finding the world's most dangerous man was the hard work and dedication of the intelligence professionals who spent years working on this global effort. We encourage people to see the film before characterizing it."

'Zero Dark Thirty' puts U.S. interrogation back in the spotlight

"Zero Dark Thirty" does indeed show many scenes of the various forms of sleuthing at the CIA that were necessary to track down al Qaeda's leader.

But the statement from the filmmakers does not address the fact that eight months ago, the chairman of the Senate Intelligence Committee had publicly said that based on an exhaustive investigation, there was no evidence that coercive interrogations helped lead to bin Laden's courier -- which is clearly what the film suggests, no matter what retrospective gloss the filmmakers now wish to apply to the issue.

Nor does the statement indicate if Sony plans to put a disclaimer at the beginning of "Zero Dark Thirty" explaining that the role of coercive interrogations in tracking down bin Laden that is shown in the film is not supported by the facts.

As I outlined in a piece on CNN.com 10 days ago assessing the role that coercive interrogations might have played in the hunt for bin Laden, about half an hour of the start of "Zero Dark Thirty" consists of scenes of a bloodied al Qaeda detainee strung to the ceiling with ropes who is beaten; forced to wear a dog collar while crawling around attached to a leash; stripped naked in the presence of a female CIA officer; blasted with heavy metal music so he is deprived of sleep; forced to endure multiple crude waterboardings; and locked into a coffin-like wooden crate.

These are the scenes that will linger with filmgoers, far more than the scene in the movie where two CIA analysts discuss what will prove to be a key lead to bin Laden that surfaces in an old file. Brutal interrogations, of course, make for a better movie than a discussion at the office.

It is only after systematic abuse by his CIA interrogators in "Zero Dark Thirty" that the al Qaeda detainee is tricked into believing that he has already given up key information, and he starts cooperating and tells them about a man known as Abu Ahmed al-Kuwaiti, who ultimately proves to be bin Laden's courier.

Acting CIA director Michael Morell, in a letter to CIA employees on Friday, took strong exception to this portrayal of how bin Laden was found:

"The film creates the strong impression that the enhanced interrogation techniques that were part of our former detention and interrogation program were the key to finding Bin Ladin. That impression is false. As we have said before, the truth is that multiple streams of intelligence led CIA analysts to conclude that Bin Ladin was hiding in Abbottabad. Some came from detainees subjected to enhanced techniques, but there were many other sources as well. "

"Zero Dark Thirty" opened Wednesday in New York and Los Angeles and will open nationwide in the second week in January.

Let's hope that the attention that "Zero Dark Thirty" has directed to the issue of what kind of intelligence was derived from the CIA's coercive interrogations will help to put pressure on the White House and the CIA to release to the public as much as possible of the presently classified 6,000-page report by the Senate Intelligence Committee that examines this issue.

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Full disclosure: Along with other national security experts, as an unpaid adviser I screened an early cut of "Zero Dark Thirty." We advised that al Qaeda detainees held at secret CIA prison sites overseas were certainly abused, but they were not beaten to a pulp, as was presented in this early cut. Screenwriter Mark Boal told CNN as a result of this critique, some of the bloodier scenes were "toned down" in the final cut. I also saw this final cut of the film. Finally, HBO is making a theatrical release documentary which will be out in 2013 based on my book about the hunt for bin Laden entitled "Manhunt."

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Some states move to ease gun rules

WASHINGTON — As Congress gears up for a fight over possible new gun restrictions, lawmakers in some states have pushed in the opposite direction — to ease gun rules — since the Dec. 14 massacre of 20 first-graders and six women at a school in Newtown, Conn.

None exactly matched the proposal Friday by Wayne LaPierre, head of the National Rifle Assn., to train and deploy armed volunteers to help guard schools around the country.

Legislation has been proposed, however, to allow teachers or other school workers to carry firearms in schools in at least seven states: Missouri, Oklahoma, South Carolina, South Dakota, Tennessee, Texas and Virginia.

"I want a last line of defense," said Jason Villalba, a Republican and newly elected Texas state representative who plans to introduce the Protection of Texas Children Act to allow schools to designate staff members as armed "marshals" provided they undergo special training.

Some lawmakers have gone further, proposing that any teacher with a permit to carry a concealed weapon be allowed to bring it into school.

"It is incredibly irresponsible to leave our schools undefended — to allow mad men to kill dozens of innocents when we have a very simple solution available to us to prevent it," said Oklahoma state Rep. Mark McCullough, a Republican who plans to sponsor legislation to allow teachers and principals to carry firearms in schools after they undergo training.

Several states have pushed for stiffer regulations. In California, lawmakers have proposed strengthening already tough state gun laws, including requiring a permit and background checks for anyone who wants to buy bullets.

Michigan Gov. Rick Snyder, a Republican, vetoed a bill last week that would have allowed gun owners with concealed weapon permits to carry their firearms into schools and other public places. Snyder objected that it didn't let institutions opt out and prohibit weapons on their grounds.

The different legislative responses underscore the difficulty of reaching a political consensus on guns, an issue that often divides lawmakers by geography as much as party affiliation.

Support for gun control measures is much higher in Democratic strongholds in the Northeast and West than in Republican bastions in the Midwest and South, according to polls. But sometimes the divisions are much closer.

Gov. Martin O'Malley of Maryland, a Democrat, complains about "too many guns" and plans to seek gun control legislation.

In neighboring Virginia, Gov. Robert McDonnell, a Republican, said the idea of arming school personnel was worth a discussion.

"If people were armed, not just a police officer but other school officials who were trained and chose to have a weapon, certainly there would have been an opportunity to stop aggressors coming into the school," McDonnell told WTOP radio in Washington.

The idea of arming teachers or administrators has drawn plenty of criticism.

"I've not heard from a single teacher or administrator who said that they want to go to school armed with a gun," said Meg Gruber, president of the Virginia Education Assn.

"Why in the world would you even think of doing this?" added Dennis Van Roekel, president of the National Education Assn. He said Sandy Hook Elementary School in Newtown "did everything right. … But you can't stop somebody with an automatic assault rifle from shooting out a window and coming through."

Betty Olson, a Republican state representative in South Dakota who proposes allowing teachers with concealed weapon permits to bring their firearms into schools, said she had gotten a favorable response.

"We've got a few anti-gun liberals who think that that's crazy, allowing anybody with a gun into the school," she said. "Never mind those lunatics."

South Carolina state Rep. Phillip D. Lowe, a Republican who proposes to allow concealed weapon permit holders who undergo rigorous training to bring guns into school, agreed.

"There's always some people who are opposed to anything with the letters G-U-N," he said.

ALSO:

Boehner's 'fiscal cliff' plan fails

Obama nominates Sen. John Kerry as secretary of State

Obama criticized over Chuck Hagel candidacy for Defense secretary 

richard.simon@latimes.com

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Egypt's constitution approved in vote, say rival camps

CAIRO (Reuters) - A constitution drafted by an Islamist-dominated assembly was approved by a majority of Egyptians in a referendum, rival camps said on Sunday, after a vote the opposition said drove a wedge through the Arab world's most populous nation.

The Muslim Brotherhood, which propelled President Mohamed Mursi to power in a June election, said 64 percent of voters backed the charter after two rounds of voting that ended with a final ballot on Saturday. It cited an unofficial tally.

An opposition official also told Reuters their unofficial count showed the result was a "yes" vote.

The referendum committee may not declare official results for the two rounds until Monday, after hearing appeals. If the outcome is confirmed, a parliamentary election will follow in about two months.

Mursi's Islamist backers say the constitution is vital for the transition to democracy, nearly two years after the overthrow of autocrat Hosni Mubarak in an uprising. It will provide stability needed to help a fragile economy, they say.

But the opposition accuses Mursi of pushing through a text that favors Islamists and ignores the rights of Christians, who make up about 10 percent of the population, as well as women. They say it is a recipe for further unrest.

"According to our calculations, the final result of the second round is 71 percent voting 'yes' and the overall result (of the two rounds) is 63.8 percent," a Brotherhood official, who was in an operations room monitoring the vote, told Reuters.

His figures were confirmed by a statement issued shortly afterwards by the group and broadcast on its television channel.

The Brotherhood and its party, as well as members of the opposition, had representatives monitoring polling stations and the vote count across the country.

The opposition said voting in both rounds was marred by abuses and had called for a re-run after the first stage. However, an official said the overall vote favored the charter.

"They (Islamists) are ruling the country, running the vote and influencing the people, so what else could we expect," the senior official from the main opposition coalition, the National Salvation Front, told Reuters.

PROTESTS

The vote was split over two days as many judges had refused to supervise the ballot.

"I'm voting 'no' because Egypt can't be ruled by one faction," said Karim Nahas, 35, a stockbroker, heading to a polling station in Giza, in greater Cairo, in the last round.

At another polling station, some voters said they were more interested in ending Egypt's long period of political instability than in the Islamist aspects of the charter.

"We have to extend our hands to Mursi to help fix the country," said Hisham Kamal, an accountant.

The build-up to the vote witnessed deadly protests, sparked by Mursi's decision to award himself extra powers in a decree on November 22 and then to fast-track the constitution to a vote.

Hours before polls closed, Vice President Mahmoud Mekky announced his resignation. He said he wanted to quit last month but stayed on to help Mursi tackle the crisis that blew up when the Islamist leader assumed wide powers.

Mekky, a prominent judge who said he was uncomfortable in politics, disclosed earlier he had not been informed of Mursi's power grab. The timing of his resignation appeared linked to the lack of a vice-presidential post under the draft constitution.

The new basic law sets a limit of two four-year presidential terms. It says the principles of Islamist sharia law remain the main source of legislation but adds an article to explain this. It also says Islamic authorities will be consulted on sharia - a source of concern to Christians and others.

TURNOUT

Rights groups reported what they said were illegalities in voting procedures. They said some polling stations opened late, that Islamists illegally campaigned at some polling places and complained of irregularities in voter registration.

But the committee overseeing the two-stage vote said its investigations showed no major irregularities in voting on December 15, which covered about half of Egypt's 51 million voters. About 25 million were eligible to vote in the second round.

The Brotherhood said turnout was about a third of voters.

The opposition says the constitution will stir up more trouble on the streets since it has not received sufficiently broad backing for a document that should be agreed by consensus, and raised questions about the fairness of the vote.

In the first round, the district covering most of Cairo voted "no," which opponents said showed the depth of division.

"I see more unrest," said Ahmed Said, head of the liberal Free Egyptians Party and a member of the National Salvation Front, an opposition coalition formed after Mursi expanded his powers on November 22 and then pushed the constitution to a vote.

He cited "serious violations" on the first day of voting, and said anger against Mursi was growing. "People are not going to accept the way they are dealing with the situation."

At least eight people were killed in protests outside the presidential palace in Cairo this month. Islamists and rivals clashed in Alexandria, the second-biggest city, on the eves of both voting days.

Late on Saturday, Mursi announced the names of 90 new members he had appointed to the upper house of parliament, state media reported, and a presidential official said the list was mainly liberals and other non-Islamists.

A spokesman for the National Salvation Front, which groups opponents who include liberals, socialists and other parties and politicians, said the Front's members had refused to take part.

Legislative powers, now held by Mursi because the lower house of parliament was dissolved earlier this year, will pass to the upper house under the new constitution.

Two-thirds of the 270-member upper house was elected in a vote this year, with one third appointed by the president. Mursi, elected in June, had not named them until now. Mursi's Islamist party and its allies dominate the assembly.

(Writing by Edmund Blair and Giles Elgood; Editing by Mark Trevelyan and Todd Eastham)

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Wall Street Week Ahead: A lump of coal for "Fiscal Cliff-mas"

NEW YORK (Reuters) - Wall Street traders are going to have to pack their tablets and work computers in their holiday luggage after all.

A traditionally quiet week could become hellish for traders as politicians in Washington are likely to fall short of an agreement to deal with $600 billion in tax hikes and spending cuts due to kick in early next year. Many economists forecast that this "fiscal cliff" will push the economy into recession.

Thursday's debacle in the U.S. House of Representatives, where Speaker John Boehner failed to secure passage of his own bill that was meant to pressure President Obama and Senate Democrats, only added to worry that the protracted budget talks will stretch into 2013.

Still, the market remains resilient. Friday's decline on Wall Street, triggered by Boehner's fiasco, was not enough to prevent the S&P 500 from posting its best week in four.

"The markets have been sort of taking this in stride," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago, which has about $38 billion in assets under management.

"The markets still basically believe that something will be done," he said.

If something happens next week, it will come in a short time frame. Markets will be open for a half-day on Christmas Eve, when Congress will not be in session, and will close on Tuesday for Christmas. Wall Street will resume regular stock trading on Wednesday, but volume is expected to be light throughout the rest of the week with scores of market participants away on a holiday break.

For the week, the three major U.S. stock indexes posted gains, with the Dow Jones industrial average <.dji> up 0.4 percent, the S&P 500 <.spx> up 1.2 percent and the Nasdaq Composite Index <.ixic> up 1.7 percent.

Stocks also have booked solid gains for the year so far, with just five trading sessions left in 2012: The Dow has advanced 8 percent, while the S&P 500 has climbed 13.7 percent and the Nasdaq has jumped 16 percent.

IT COULD GET A LITTLE CRAZY

Equity volumes are expected to fall sharply next week. Last year, daily volume on each of the last five trading days dropped on average by about 49 percent, compared with the rest of 2011 - to just over 4 billion shares a day exchanging hands on the New York Stock Exchange, the Nasdaq and NYSE MKT in the final five sessions of the year from a 2011 daily average of 7.9 billion.

If the trend repeats, low volumes could generate a spike in volatility as traders keep track of any advance in the cliff talks in Washington.

"I'm guessing it's going to be a low volume week. There's not a whole lot other than the fiscal cliff that is going to continue to take the headlines," said Joe Bell, senior equity analyst at Schaeffer's Investment Research, in Cincinnati.

"A lot of people already have a foot out the door, and with the possibility of some market-moving news, you get the possibility of increased volatility."

Economic data would have to be way off the mark to move markets next week. But if the recent trend of better-than-expected economic data holds, stocks will have strong fundamental support that could prevent selling from getting overextended even as the fiscal cliff negotiations grind along.

Small and mid-cap stocks have outperformed their larger peers in the last couple of months, indicating a shift in investor sentiment toward the U.S. economy. The S&P MidCap 400 Index <.mid> overcame a technical level by confirming its close above 1,000 for a second week.

"We view the outperformance of the mid-caps and the break of that level as a strong sign for the overall market," Schaeffer's Bell said.

"Whenever you have flight to risk, it shows investors are beginning to have more of a risk appetite."

Evidence of that shift could be a spike in shares in the defense sector, expected to take a hit as defense spending is a key component of the budget talks.

The PHLX defense sector index <.dfx> hit a historic high on Thursday, and far outperformed the market on Friday with a dip of just 0.26 percent, while the three major U.S. stock indexes finished the day down about 1 percent.

Following a half-day on Wall Street on Monday ahead of the Christmas holiday, Wednesday will bring the S&P/Case-Shiller Home Price Index. It is expected to show a ninth-straight month of gains.

U.S. jobless claims on Thursday are seen roughly in line with the previous week's level, with the forecast at 360,000 new filings for unemployment insurance, compared with the previous week's 361,000.

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

(Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Douglas wins AP female athlete of the year honors

When Gabby Douglas allowed herself to dream of being the Olympic champion, she imagined having a nice little dinner with family and friends to celebrate. Maybe she'd make an appearance here and there.

"I didn't think it was going to be crazy," Douglas said, laughing. "I love it. But I realized my perspective was going to have to change."

Just a bit.

The teenager has become a worldwide star since winning the Olympic all-around title in London, the first African-American gymnast to claim gymnastics' biggest prize. And now she has earned another honor. Douglas was selected The Associated Press' female athlete of the year, edging out swimmer Missy Franklin in a vote by U.S. editors and news directors that was announced Friday.

"I didn't realize how much of an impact I made," said Douglas, who turns 17 on Dec. 31. "My mom and everyone said, 'You really won't know the full impact until you're 30 or 40 years old.' But it's starting to sink in."

In a year filled with standout performances by female athletes, those of the pint-sized gymnast shined brightest. Douglas received 48 of 157 votes, seven more than Franklin, who won four gold medals and a bronze in London. Serena Williams, who won Wimbledon and the U.S. Open two years after her career was nearly derailed by a series of health problems, was third (24).

Britney Griner, who led Baylor to a 40-0 record and the NCAA title, and skier Lindsey Vonn each got 18 votes. Sprinter Allyson Felix, who won three gold medals in London, and Carli Lloyd, who scored both U.S. goals in the Americans' 2-1 victory over Japan in the gold-medal game, also received votes.

"One of the few years the women's (Athlete of the Year) choices are more compelling than the men's," said Julie Jag, sports editor of the Santa Cruz Sentinel.

Douglas is the fourth gymnast to win one of the AP's annual awards, which began in 1931, and first since Mary Lou Retton in 1984. She also finished 15th in voting for the AP sports story of the year.

Douglas wasn't even in the conversation for the Olympic title at the beginning of the year. That all changed in March when she upstaged reigning world champion and teammate Jordyn Wieber at the American Cup in New York, showing off a new vault, an ungraded uneven bars routine and a dazzling personality that would be a hit on Broadway and Madison Avenue.

She finished a close second to Wieber at the U.S. championships, then beat her two weeks later at the Olympic trials. With each competition, her confidence grew. So did that smile.

By the time the Americans got to London, Douglas had emerged as the most consistent gymnast on what was arguably the best team the U.S. has ever had.

She posted the team's highest score on all but one event in qualifying. She was the only gymnast to compete in all four events during team finals, when the Americans beat the Russians in a rout for their second Olympic title, and first since 1996. Two nights later, Douglas claimed the grandest prize of all, joining Retton, Carly Patterson and Nastia Liukin as what Bela Karolyi likes to call the "Queen of Gymnastics."

But while plenty of other athletes won gold medals in London, none captivated the public quite like Gabby.

Fans ask for hugs in addition to photographs and autographs, and people have left restaurants and cars upon spotting her. She made Barbara Walters' list of "10 Most Fascinating People," and Forbes recently named her one of its "30 Under 30." She has deals with Nike, Kellogg Co. and AT&T, and agent Sheryl Shade said Douglas has drawn interest from companies that don't traditionally partner with Olympians or athletes.

"She touched so many people of all generations, all diversities," Shade said. "It's her smile, it's her youth, it's her excitement for life. ... She transcends sport."

Douglas' story is both heartwarming and inspiring, its message applicable those young or old, male or female, active or couch potato. She was just 14 when she convinced her mother to let her leave their Virginia Beach, Va., home and move to West Des Moines, Iowa, to train with Liang Chow, Shawn Johnson's coach. Though her host parents, Travis and Missy Parton, treated Douglas as if she was their fifth daughter, Douglas was so homesick she considered quitting gymnastics.

She's also been open about her family's financial struggles, hoping she can be a role model for lower income children.

"I want people to think, 'Gabby can do it, I can do it,'" Douglas said. "Set that bar. If you're going through struggles or injuries, don't let it stop you from what you want to accomplish."

The grace she showed under pressure — both on and off the floor — added to her appeal. When some fans criticized the way she wore her hair during the Olympics, Douglas simply laughed it off.

"They can say whatever they want. We all have a voice," she said. "I'm not going to focus on it. I'm not really going to focus on the negative."

Besides, she's having far too much fun.

Her autobiography, "Grace, Gold and Glory," is No. 4 on the New York Times' young adult list. She, Wieber and Fierce Five teammates Aly Raisman and McKayla Maroney recently wrapped up a 40-city gymnastics tour. She met President Barack Obama last month with the rest of the Fierce Five, and left the White House with a souvenir.

"We got a sugar cookie that they were making for the holidays," Douglas said. "I took a picture of it."

Though her busy schedule hasn't left time to train, Douglas insists she still intends to compete through the Rio de Janeiro Olympics in 2016.

No female Olympic champion has gone on to compete at the next Summer Games since Nadia Comaneci. But Douglas is still a relative newcomer to the elite scene — she'd done all of four international events before the Olympics — and Chow has said she hasn't come close to reaching her full potential. She keeps up with Chow through email and text messages, and plans to return to Iowa after her schedule clears up in the spring.

Of course, plenty of other athletes have said similar things and never made it back to the gym. But Douglas is determined, and she gets giddy just talking about getting a new floor routine.

"I think there's even higher bars to set," she said.

Because while being an Olympic champion may have changed her life, it hasn't changed her.

"I may be meeting cool celebrities and I'm getting amazing opportunities," she said. "But I'm still the same Gabby."

___

AP Projects Editor Brooke Lansdale contributed to this report.

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Madness in the air in Washington

National Rifle Association Executive Vice President Wayne LaPierre calls on Congress to pass a law putting armed police officers in every school in America.

STORY HIGHLIGHTS

• David Gergen: After election, there were hopes partisan tension would fade


• He says this week we've seen a complete breakdown on the fiscal cliff


• The NRA doubled down on its anti-gun-control rhetoric despite Newtown, he says


• Gergen: We're seeing the character assassination of a hero, Chuck Hagel

Editor's note: David Gergen is a senior political analyst for CNN and has been an adviser to four presidents. A graduate of Harvard Law School, he is a professor of public service and director of the Center for Public Leadership at Harvard University's Kennedy School of Government. Follow him on Twitter.

(CNN) -- What in the world is gripping Washington? Everywhere one turns -- from finances to guns to nominations -- there is madness in the air.

With time rapidly running out, efforts have collapsed to reach a major agreement on federal spending and taxes before year's end, and both Congress and President are leaving town for the holidays. At best, they will return next week and construct a small bridge over the "fiscal cliff"; at worst, they won't. But who knows?

David Gergen

And that's a big part of the problem -- no one can be confident that our national leaders are still capable of governing responsibly. And in the process, they are putting both our economy and our international reputation at risk.

Fresh poison

President Barack Obama had rightly hoped that the elections would clear the air; they haven't. If anything, the recent squabbling over the federal budget has injected fresh poison into relationships and dimmed prospects for other bipartisan agreements in the next few years, starting with hopes for a "grand bargain"in 2013.

John Boehner and Eric Cantor, the House GOP leaders

The President insists he remains an optimist, but if he and Republicans can't agree on how to bring the nation's finances under control -- something fundamental to the welfare of the country -- why should we have faith they will succeed on other important issues like energy, education, immigration and gun safety?

As the blame game heats up, Republicans are sure to pay the biggest price with the public. It was bad enough that they lost the message fight, letting themselves be painted as protectors of the wealthy. But it was inexcusable when they revolted against House Speaker John Boehner in his search for a way forward: that only reinforced a narrative that the Grand Old Party has fallen hostage to its right wing -- a narrative that already exacted a huge price in the fall elections.

Most voters -- I am among them -- believe the country needs a center-right party but will not support an extremist party.

President Obama is certainly not blameless in these financial talks. Early on, he overplayed his hand, alienating rank-and-file Republicans. Like Boehner, he has been more accommodating recently, offering concessions on taxes and entitlement spending that narrowed the negotiating gap between the parties, even as his leftward allies fretted.

Still, Boehner has a point in arguing that what Obama now has on the table comes nowhere close to what the he was advocating in the election season: a ratio of 2.5 dollars in spending cuts to 1.0 dollars in tax increases.

The buck stops on the President's desk, so that ordinarily one would expect him to take the lead in these final days before January 1. For reasons that are still unclear, he instead chose in his press statement late Friday to toss responsibility for negotiations next week into the laps of Congressional leaders.

Perhaps he has reached a quiet understanding with Boehner and Senate Majority Leader Harry Reid that the two of them can work out a stripped-down agreement. Let's hope so. But as we enter the holidays, it appears to be a mess. And time is quickly running out.

The NRA in denial

As if Friday weren't gloomy enough, the National Rifle Association weighed in with its long-awaited response to the horrors of Newtown, Connecticut. There had been hints that the NRA would offer a more conciliatory stance. Just the opposite: they doubled down.

Incredibly, Wayne LaPierre, executive vice president of the NRA, called for putting armed police officers in every school. Isn't that what parents of every six-year old have been longing for: to have their child studying and playing under the watchful eye of an armed guard? Has LaPierre visited an elementary school classroom in recent years? If so, he would know his idea would be repulsive in most schools.

Just as strikingly, the NRA response refused to acknowledge and address the beliefs of a majority of Americans in recent polls that the U.S. needs tougher laws in favor of gun safety. Americans aren't saying no one should have guns or that the 2nd Amendment should be gutted but they are demanding a national conversation to see what can be sensibly done. It is hard to have a conversation when one side won't talk.

Character assassination

Meanwhile, in a less noticed but important saga in Washington, we are once again watching the character assassination of a public servant of honor and distinction.

Chuck Hagel served America with valor as a sergeant in the Vietnam war, earning two Purple Hearts. He was a popular Republican senator from Nebraska who paid close attention to international affairs and is now co-chair of the President's Foreign Intelligence Advisory Board, serving with another former Senator, David Boren.

Ever since Hagel's name arose as a top candidate to become the next Secretary of Defense, he has been pilloried for statements and stands he has taken in the past. Is it legitimate to question his positions on Israel, Iran, and on gays? Absolutely. But what is grossly unfair is to misstate them, saying that he is against sanctions on Iran when in fact he has argued in favor of international sanctions, not unilateral sanctions (which don't work). As someone who strongly favors Israel, I am also deeply troubled by the way he has been misrepresented as virtually anti-Semitic.

Nor is this a fair fight. Hagel is in no-man's land because his name is prominently mentioned but he hasn't been formally nominated, so the White House isn't rushing to the barricades to support him.

The signals from 1600 Pennsylvania Avenue were that the Secretary of Defense nominee would be announced in a package with the Secretary of State. The President has now gone ahead with John Kerry but the absence of a Defense nominee has now left Hagel dangling in the breeze, a piñata.

The White House should now move early next week -- by announcement or by leak -- to settle this by making a decision. Whether or not the President nominates Hagel, he should put a stop to the defamation by recognizing Hagel as a patriot with an independent mind and a long record of honor. If selected as Secretary, Hagel would be a very fine member of the national security team.

One had hoped that the shootings at Sandy Hook would draw us together. Sadly, they haven't. Now, perhaps the blessings of the holidays and a brief moment to take a breath will lift our sights. Surely, this madness should not continue into the New Year.

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The opinions expressed in this commentary are solely those of David Gergen.

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Capture of jail escapee ends with bang, thud

The parents of the man who owned the townhouse where prison escapee Joseph Banks was found talk to the Tribune. (Antonio Perez/Chicago Tribune)

The spectacular escape from Chicago's high-rise federal jail — the first in nearly 30 years at the facility — fueled theories that convicted bank robber Joseph "Jose" Banks had a sophisticated plan to elude capture with hundreds of thousands of dollars in loot he had stashed away.

But in the end, Banks was hiding in a predictable spot less than five miles from the South Loop jail and was betrayed by someone who had spoken with the fugitive and was able to give authorities his exact location, a law enforcement source said. When he was captured, Banks had no cash, weapon or cellphone, and he was wearing some of the same clothes he had on when he escaped three days earlier, the source said.

Banks, who along with a cellmate scaled down some 15 stories of the sheer wall of the Metropolitan Correctional Center using a rope fashioned from knotted bedsheets, was taken into custody on the North Side by FBI agents and Chicago police about 11:30 p.m. Thursday. He was holed up at the home of a boyhood friend in the 2300 block of North Bosworth Avenue, just blocks from his former apartment and Lincoln Park High School, which he attended in the 1990s.

The second escapee, Kenneth Conley, also a convicted bank robber, remained at large Friday.

Neighbors on the quiet block where Banks was discovered described hearing the loud bang of a flash grenade — designed to stun anyone inside a residence without causing serious injury — followed by agents and officers swarming the Fullerton Court Apartments just west of the DePaul University campus.

Within minutes, agents led Banks away in handcuffs and dressed in a T-shirt and shorts.

"We heard a big boom first," said the Rev. Baggett Collier, who lives in the complex. "We thought a transformer burst or there was a traffic accident. … I went out and I saw (Banks). He was cuffed. His head was down. I didn't hear him say anything. They got him into the wagon peacefully. The police were pretty calm bringing him out."

Hours later, Banks shuffled into a federal courtroom dressed in an orange prison jumpsuit and shackled at the waist and ankles with thick, padlocked chains. The slightly built former fashion designer answered questions from U.S. Magistrate Judge Sidney Schenkier softly and politely — a sharp contrast to his defiant behavior during his trial last week on bank robbery charges in the same federal courthouse.

Banks, a prolific bank robber dubbed the Second Hand Bandit because of the used clothing he wore during his holdups, was charged with one count of escaping federal custody that carries a sentence of up to five years in prison on conviction. He also faces sentencing in March for his conviction last week for two bank robberies and two attempted holdups.

Prosecutors objected to any bond being set on the new charge, suggesting matter-of-factly that Banks was a "flight risk" and a danger to the community. Banks' attorney, Beau Brindley, did not argue for his release.

After the brief hearing, Brindley called his client a "mild-mannered" person whose statements at trial were misconstrued as threats toward the court system.

"This is not a violent person," Brindley told reporters in the lobby of the Dirksen U.S. Courthouse. "He's a talented artist and clothing designer."

Banks' cousin Theresa Ann Banks said in a telephone interview Friday that he never tried to contact her or anyone else in the family during his short time on the run. Family members were still trying to piece together conflicting information they were getting on the circumstances of his arrest, she said. Asked who lived in the home where her cousin was found, she replied, "Maybe a friend."

Theresa Ann Banks said the family has spent the past few days scared for his safety, especially since he had been described as "armed and dangerous."

"He's not the bad guy they've made him out to be," she said of her cousin. "He's soft and gentle, and he has a good heart."

Banks and Conley were last accounted for in the jail at 10 p.m. Monday during a routine bed check, authorities said. About 7 a.m. the next day, jail employees arriving for work saw ropes made from bedsheets dangling from a hole in the wall near the 15th floor and down the south side of the facade.

The two had put clothing and sheets under blankets in their beds to throw off guards making nighttime checks and removed a cinder block to create an opening wide enough to slide through, authorities said.

The FBI said a surveillance camera a few blocks from the jail showed the two, wearing light-colored clothing, hailing a taxi at Congress Parkway and Michigan Avenue. They also appeared to be wearing backpacks, according to the FBI.

The daring escape was an embarrassment for the U.S. Bureau of Prisons and a rarity for the Metropolitan Correctional Center, where the only previous successful escape took place in 1985. A high-ranking employee in the facility told the Tribune this week that video surveillance had captured the men making their descent, but that the guard who was supposed to be watching the video monitors for suspicious activity may have been called away on other duties.

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Iran defense minister says NATO missiles harm Turkey security

DUBAI (Reuters) - The installation of Patriot anti-missile batteries sent by NATO members to bolster Turkey's defenses against a possible missile attack from Syria will only harm Turkey's security, Iran's defense minister was quoted as saying on Saturday.

NATO approved Turkey's request for the air defense system earlier this month, in a move meant to calm Ankara's fears of being hit by Syrian missiles.

Iran has strongly supported its Arab ally President Bashar al-Assad of Syria as he attempts to suppress a 21-month-old uprising against his rule. Tehran opposes the installation of NATO missiles as Western interference in the region and has said it could lead to a "world war.

"The installation of Patriot missiles in Turkey plays no role in establishing Turkey's security and this harms the country of Turkey," Iranian Defense Minister Ahmad Vahidi said on Saturday, according to the Iranian Students' News Agency (ISNA). "The West has always pursued its viewpoints and interests and we disagree with the presence of Western countries in regional interactions."

Vahidi also denied that Iran is training Syrian forces to battle the rebels, ISNA reported. Iran considers itself, Syria's rulers and the Lebanese Shi'ite militant group Hezbollah as part of an "axis of resistance" against U.S. and Israeli power in the Middle East, but has denied accusations that it helping Assad militarily.

"Syria has no need for the training of its forces by the Islamic Republic of Iran, because Syria has a powerful military which has prepared itself for involvement with the Zionist regime (Israel)," Vahidi said.

(Reporting by Yeganeh Torbati; Editing by Lisa Shumaker)

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Syrian rebels fight for strategic town in Hama province

BEIRUT (Reuters) - Rebels began to push into a strategic town in Syria's central Hama province on Thursday and laid siege to at least one town dominated by President Bashar al-Assad's minority sect, activists said.

The operation risks inflaming already raw sectarian tensions as the 21-month-old revolt against four decades of Assad family rule - during which the president's Alawite sect has dominated leadership of the Sunni Muslim majority - rumbles on.

Opposition sources said rebels had won some territory in the strategic southern town of Morek and were surrounding the Alawite town of al-Tleisia.

They were also planning to take the town of Maan, arguing that the army was present there and in al-Tleisia and was hindering their advance on nearby Morek, a town on the highway that runs from Damascus north to Aleppo, Syria's largest city and another battleground in the conflict.

"The rockets are being fired from there, they are being fired from Maan and al-Tleisia, we have taken two checkpoints in the southern town of Morek. If we want to control it then we need to take Maan," said a rebel captain in Hama rural area, who asked not to be named.

Activists said heavy army shelling had targeted the town of Halfaya, captured by rebels two days earlier. Seven people were killed, 30 were wounded, and dozens of homes were destroyed, said activist Safi al-Hamawi.

Hama is home to dozens of Alawite and Christian villages among Sunni towns, and activists said it may be necessary to lay siege to many minority areas to seize Morek. Rebels want to capture Morek to cut off army supply lines into northern Idlib, a province on the northern border with Turkey where rebels hold swathes of territory.

From an offshoot of Shi'ite Islam, Alawites have largely stood behind Assad, many out of fear of revenge attacks. Christians and some other minorities have claimed neutrality, with a few joining the rebels and a more sizeable portion of them supporting the government out of fear of hardline Islamism that has taken root in some rebel groups.

Activists in Hama said rebels were also surrounding the Christian town of al-Suqeilabiya and might enter the city to take out army positions as well as those of "shabbiha" - pro-Assad militias, the bulk of whom are usually Alawite but can also include Christians and even Sunnis.

"We have been in touch with Christian opposition activists in al-Suqeilabiya and we have told them to stay downstairs or on the lowest floor of their building as possible, and not to go outside. The rebels have promised not to hurt anyone who stays at home," said activist Mousab al-Hamdee, speaking by Skype.

He said he was optimistic that potential sectarian tensions with Christians could be resolved but that Sunni-Alawite strife may be harder to suppress.

SECTARIAN FEARS

U.N. human rights investigators said on Thursday that Syria's conflict was becoming more "overtly sectarian", with more civilians seeking to arm themselves and foreign fighters - mostly Sunnis - flocking in from 29 countries.

"They come from all over, Europe and America, and especially the neighboring countries," said Karen Abuzayd, one of the U.N. investigators, told a news conference in Brussels.

Deeper sectarian divisions may diminish prospects for post-conflict reconciliation even if Assad is ousted, and the influx of foreigners raises the risk of fighting spilling into neighboring countries riven by similar communal fault lines.

Some activists privately voiced concerns of sectarian violence, but the rebel commander in Hama said fighters had been told "violations" would not be tolerated and argued that the move to attack the towns was purely strategic.

"If we are fired at from a Sunni village that is loyal to the regime we go in and we liberate it and clean it," he said. "So should we not do the same when it comes to an Alawite village just because there is a fear of an all-out sectarian war? We respond to the source of fire."

President Vladimir Putin of Russia, Assad's main ally and arms supplier, warned that any solution to the conflict must ensure government and rebel forces do not merely swap roles and fight on forever. It appeared to be his first direct comment on the possibility of a post-Assad Syria.

The West and some Arab states accuse Russia of shielding Assad after Moscow blocked three U.N. Security Council resolutions intended to increase pressure on Damascus to end the violence, which has killed more than 40,000 people. Putin said the Syrian people would ultimately decide their own fate.

Assad's forces have been hitting back at rebel advances with heavy shelling, particularly along the eastern ring of suburbs outside Damascus, where rebels are dominant.

A Syrian security source said the army was planning heavy offensives in northern and central Syria to stem rebel advances, but there was no clear sign of such operations yet.

Rebels seized the Palestinian refugee district of Yarmouk earlier this week, which put them within 3 km (2 miles) of downtown Damascus. Heavy shelling and fighting forced thousands of Palestinian and Syrian residents to flee the Yarmouk area.

Rebels said on Thursday they had negotiated to put the camp - actually a densely packed urban district - back into the hands of pro-opposition Palestinian fighters. There are some 500,000 Palestinian refugees and their descendants living in Syria, and they have been divided by the uprising.

Palestinian factions, some backed by the government and others by the rebels, had begun fighting last week, a development that allowed Syrian insurgents to take the camp.

A resident in Damascus said dozens of families were returning to the camp but that the army had erected checkpoints. Many families were still hesitant to return.

LEBANON BORDER POST TAKEN

Elsewhere, Syrian insurgents took over an isolated border post on the western frontier with Lebanon earlier this week, local residents told Reuters on Thursday.

The rebels already hold much of the terrain along Syria's northern and eastern borders with Turkey and Iraq respectively.

They said around 20 rebels from the Qadissiyah Brigade overran the post at Rankus, which is linked by road to the remote Lebanese village of Tufail.

Video footage downloaded on the Internet on Thursday, dated December 16, showed a handful of fighters dressed in khaki fatigues and wielding rifles as they kicked down a stone barricade around a small, single-storey army checkpoint.

Syrian Interior Minister Ibrahim al-Shaar arrived in Lebanon on Wednesday for treatment of wounds sustained in a bomb attack on his ministry in Damascus a week ago.

Lebanese medical sources said Shaar had shrapnel wounds in his shoulder, stomach and legs but they were not critical.

The Syrian opposition has tried to peel off defectors from the government as well as from the army, though only a handful of high-ranking officials have abandoned Assad.

The conflict has divided many Syrian families. Security forces on Thursday arrested an opposition activist who is also the relative of Vice President Farouq al-Sharaa, the Syrian Observatory said. The man was arrested along with five other activists who are considered pacifists, it said.

Sharaa, a Sunni Muslim who has few powers in Assad's Alawite-dominated power structure, said earlier this week that neither side could win the war in Syria. He called for the formation of a national unity government.

(Reporting by Erika Solomon; Editing by Andrew Osborn)

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Fewer health care options for illegal immigrants

For years, Sonia Limas would drag her daughters to the emergency room whenever they fell sick. As an illegal immigrant, she had no health insurance, and the only place she knew to seek treatment was the hospital — the most expensive setting for those covering the cost.

The family's options improved somewhat a decade ago with the expansion of community health clinics, which offered free or low-cost care with help from the federal government. But President Barack Obama's health care overhaul threatens to roll back some of those services if clinics and hospitals are overwhelmed with newly insured patients and can't afford to care for as many poor families.

To be clear, Obama's law was never intended to help Limas and an estimated 11 million illegal immigrants like her. Instead, it envisions that 32 million uninsured Americans will get access to coverage by 2019. Because that should mean fewer uninsured patients showing up at hospitals, the Obama program slashed the federal reimbursement for uncompensated care.

But in states with large illegal immigrant populations, the math may not work, especially if lawmakers don't expand Medicaid, the joint state-federal health program for the poor and disabled.

When the reform has been fully implemented, illegal immigrants will make up the nation's second-largest population of uninsured, or about 25 percent. The only larger group will be people who qualify for insurance but fail to enroll, according to a 2012 study by the Washington-based Urban Institute.

And since about two-thirds of illegal immigrants live in just eight states, those areas will have a disproportionate share of the uninsured to care for.

In communities "where the number of undocumented immigrants is greatest, the strain has reached the breaking point," Rich Umbdenstock, president of the American Hospital Association, wrote last year in a letter to Obama, asking him to keep in mind the uncompensated care hospitals gave to that group. "In response, many hospitals have had to curtail services, delay implementing services, or close beds."

The federal government has offered to expand Medicaid, but states must decide whether to take the deal. And in some of those eight states — including Texas, Florida and New Jersey — hospitals are scrambling to determine whether they will still have enough money to treat the remaining uninsured.

Without a Medicaid expansion, the influx of new patients and the looming cuts in federal funding could inflict "a double whammy" in Texas, said David Lopez, CEO of the Harris Health System in Houston, which spends 10 to 15 percent of its $1.2 billion annual budget to care for illegal immigrants.

Realistically, taxpayers are already paying for some of the treatment provided to illegal immigrants because hospitals are required by law to stabilize and treat any patients that arrive in an emergency room, regardless of their ability to pay. The money to cover the costs typically comes from federal, state and local taxes.

A solid accounting of money spent treating illegal immigrants is elusive because most hospitals do not ask for immigration status. But some states have tried.

California, which is home to the nation's largest population of illegal immigrants, spent an estimated $1.2 billion last year through Medicaid to care for 822,500 illegal immigrants.

The New Jersey Hospital Association in 2010 estimated that it cost between $600 million and $650 million annually to treat 550,000 illegal immigrants.

And in Texas, a 2010 analysis by the Health and Human Services Commission found that the agency had provided $96 million in benefits to illegal immigrants, up from $81 million two years earlier. The state's public hospital districts spent an additional $717 million in uncompensated care to treat that population.

If large states such as Florida and Texas make good on their intention to forgo federal money to expand Medicaid, the decision "basically eviscerates" the effects of the health care overhaul in those areas because of "who lives there and what they're eligible for," said Lisa Clemans-Cope, a senior researcher at the Urban Institute.

Seeking to curb expenses, hospitals might change what qualifies as an emergency or cap the number of uninsured patients they treat. And although it's believed states with the most illegal immigrants will face a smaller cut, they will still lose money.

The potential impacts of reform are a hot topic at MD Anderson Cancer Center in Houston. In addition to offering its own charity care, some MD Anderson oncologists volunteer at a county-funded clinic at Lyndon B. Johnson General Hospital that largely treats the uninsured.

"In a sense we've been in the worst-case scenario in Texas for a long time," said Lewis Foxhall, MD Anderson's vice president of health policy in Houston. "The large number of uninsured and the large low-income population creates a very difficult problem for us."

Community clinics are a key part of the reform plan and were supposed to take up some of the slack for hospitals. Clinics received $11 billion in new funding over five years so they could expand to help care for a swell of newly insured who might otherwise overwhelm doctors' offices. But in the first year, $600 million was cut from the centers' usual allocation, leaving many to use the money to fill gaps rather than expand.

There is concern that clinics could themselves be inundated with newly insured patients, forcing many illegal immigrants back to emergency rooms.

Limas, 44, moved to the border town of Alamo 13 years ago with her husband and three daughters. Now single, she supports the family by teaching a citizenship class in Spanish at the local community center and selling cookies and cakes she whips up in her trailer. Soon, she hopes to seek a work permit of her own.

For now, the clinic helps with basic health care needs. If necessary, Limas will return to the emergency room, where the attendants help her fill out paperwork to ensure the government covers the bills she cannot afford.

"They always attended to me," she said, "even though it's slow."

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