Wall Street trips and falls on cloudy Italian election

NEW YORK (Reuters) - Stocks on Monday suffered their biggest drop since November after a strong showing in Italian elections by groups opposed to the country's economic reforms triggered worry that Europe's debt problems could once again destabilize the global economy.

The decline marks the biggest percentage drop for the benchmark Standard & Poor's 500 Index since November7, and drove the S&P down to its lowest close since January 18. The CBOE Volatility Index <.vix> or VIX, Wall Street's favorite barometer of fear, surged 34 percent, its biggest jump since August 18, 2011.

Selling accelerated late in the trading session after the S&P 500 fell below the 1,500 level, which has acted as a significant support point. Monday marked the S&P's first close under 1,500 since February 4.

Italy's center-left coalition holds a slim lead over former Prime Minister Silvio Berlusconi's center-right bloc in the election for the lower house of parliament, three TV projections indicated. But any government must also command a majority in the Senate, a race that is decided by region.

The resulting gridlock in parliament could lead to new elections and cast into doubt Italy's ability to pay down its debt.

"Europe hasn't gone away as an issue, it is going to hang around, and it is rearing its ugly head today," said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.

"If someone gets elected who is simply not going to play by the rules, what are they going to do? It puts them in a real quandary here because their financial support, their monetary support is all stipulated by the fact that these austerity programs are going to be in place."

Earlier polls pointing to a center-left victory boosted stocks in Milan and other European markets, and also helped lift the S&P 500 to a session high of 1,525.84 on optimism that Italy would continue down its austerity path.

After a strong start to the year, equities have retreated more recently. The S&P 500's slight fall last week was its first weekly drop after a seven-week string of gains.

In Monday's volatile session, banks and other financial stocks were among the worst performers on worries about the sector's exposure to Italy's massive debt. The KBW Bank Index <.bkx> fell 2.7 percent.

The CBOE Volatility Index <.vix> ended at 18.99, up 34.02 percent.

The Dow Jones industrial average <.dji> dropped 216.40 points, or 1.55 percent, to 13,784.17 at the close. The Standard & Poor's 500 Index <.spx> lost 27.75 points, or 1.83 percent, to 1,487.85. The Nasdaq Composite Index <.ixic> fell 45.57 points, or 1.44 percent, to 3,116.25.

Although the overall market lost ground on Monday, there were a few bright spots.

Barnes & Noble Inc shares shot up 11.5 percent to $15.06 after the bookseller's chairman offered to buy its declining retail business.

Amgen Inc shares climbed 3.1 percent to $89.55, after rival Affymax issued a voluntary recall of its only drug, an anemia treatment that competes with Amgen's top-selling red blood cell booster, Epogen. Affymax shares lost 85.4 percent to $2.42.

The FTSEurofirst-300 index of top European shares <.fteu3> edged up 0.04 percent and Italy's main FTSE MIB <.ftmib> ended up 0.7 percent after earlier gaining nearly 4 percent.

Political uncertainty on the home front, though, is also on Wall Street's mind.

U.S. equities will face a test with the looming debate over so-called sequestration - U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement over spending and taxes. The White House issued warnings about the harm the cuts are likely to inflict on the economy if enacted.

"Sitting out there is the one-thousand-pound gorilla - the sequester issue - and certainly nothing is happening there," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Lowe's Companies Inc lost 4.8 percent to $35.86 after the home improvement retailer posted fourth-quarter earnings.

With 83 percent of the S&P 500 companies having reported results so far, 69 percent beat profit expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data.

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

Volume was active with about 7.27 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, above the daily average of 6.46 billion.

Declining stocks outnumbered advancing ones on both the NYSE and the Nasdaq by a ratio of about 4 to 1.

(Editing by Kenneth Barry, Nick Zieminski and Jan Paschal)

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Nazaré Journal: On Portugal Beach, Riding a Wave That Hits Like a Quake

Rafael Marchante/Reuters

Garett McNamara preparing to surf at Praia do Norte beach. “Praia do Norte is the best secret in the world,” Mr. McNamara said by telephone from Hawaii.

NAZARÉ, Portugal — The big ones typically come only once a year, in the winter. Whipped up by powerful storms in the North Atlantic, they roll for days toward Europe, rising to seemingly impossible heights before crashing on the shores of Praia do Norte, a beach along the Portuguese coast just north of this picturesque fishing town.

“It is like an earthquake,” said Pedro Pisco, a city hall administrator from this old fishing port, a few miles away from Praia do Norte. “When it breaks, you can feel the earth shaking under your feet.”

The area has a reputation as a dangerous spot for its turbulent gales, crushing surf and frequent accidents, though on a recent day the sea was flat as a reflecting pool. Normally, though, the waves crash on shore with a special power, and for years residents were not even sure they were safe to surf.

Despite its charm and a stunning 14th-century church, Nazaré has seen some bad times, with the decline of its once-prosperous fishing industry and an exodus of local youth. And that was before the euro crisis and the deep slump in the Portuguese economy.

But thanks to a photo that electrified the world last month — showing a big-wave surfer named Garett McNamara setting a world record by streaking down the face of an estimated 100-foot breaker — the city is now busily trying to cash in on its moment of fame to promote itself and its now famous beach, Praia do Norte, as a pre-eminent big wave surfing spot.

The waves here have long been compared to invincible enemies, killing fishermen, vacationers and frequently inundating streets and shops. There is even a spot called “the reef of widows,” where by legend the wives of fishermen would watch their husbands drowning after waves had destroyed their boats.

The town is still filled with widows wearing black dresses or the traditional seven layers of multicolored petticoats and long socks. A local legend says that women wore seven skirts because while waiting for their husbands to sail home, they would count seven waves until the sea would calm down.

Dino Casimiro, a 35-year-old body-boarder from Nazaré, is an ardent admirer of the waves and one of the major initiators of the city’s image makeover.

“For many years, we didn’t know if the waves were surfable or not,” said Mr. Casimiro, a physical education teacher in several local schools. “They were too big.”

In 2010, with the town’s big-wave fame spreading, several of the biggest names in surfing — including Mr. McNamara, who lives in Hawaii, and Kelly Slater, Shane Dorian and Tiago Pires, the Portuguese surf champion — came to Praia do Norte. “Praia do Norte is the best secret in the world,” Mr. McNamara said by telephone from Hawaii. “There is nowhere in the world where you can be so close to the giant waves.”

The project, called the “Zon North Canyon show” and developed with Mr. McNamara, was aimed at promoting him as well as the town. It was sponsored by Zon, Portugal’s main media holding company, after Mr. McNamara broke his first world record here by surfing a 78-foot wave.

Then last month Mr. McNamara spent about 30 seconds on the face of a giant wave still spoken of with awe by other surfers. “It was like riding a mountain, like snowboarding down a giant mountain,” he said.

There are big wave spots far from land, like Cortes Bank 100 miles west of San Diego, Calif. But there are very few in coastal areas, because the gently sloping continental shelf normally flattens out the giants, gradually sapping their strength before they can reach land. But this small part of the Portuguese coast sits at the end of a giant funnel called the “canyon of Nazaré,” 130 miles long and 16,000 feet deep (at its deepest), that points like an arrow toward the town.

The canyon, said Luis Quaresma, an oceanographer at the Lisbon-based Instituto Hidrografico, creates “a highway for the swell,” which arrives with a lot of energy, very close to the beach. “While the waves here are almost always imposing, local people say, occasionally — on average, once a year — a few swells of almost unimaginable height will roll in,” he said.

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Kristen Stewart Uses Crutches at Academy Awards

By Maggie Coughlan and Michelle Ward

02/24/2013 at 09:45 PM EST

That's an unexpected accessory!

Kristen Stewart attended the 85th Annual Academy Awards on Sunday sporting quite the fashion statement – crutches.

The On the Road actress was forced to use them to help her make her way onto the red carpet after she stepped on glass.

The star's makeup artist, Beau Nelson, tells PEOPLE she "cut the ball of her foot, quite severely, on glass two days ago." But a true pro, Stewart, 22, managed to pose for photographs without any crutches, showing off her cream-colored Reem Acra gown. Nelson adds that Stewart is in "a little bit of pain" and it was a scramble to find suitable flats!

While she isn't nominated for any Oscars, Stewart's film Breaking Dawn Part 2 did sweep the 33rd annual Golden Raspberry Awards – better known as the Razzies – with seven awards.

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FDA approves new targeted breast cancer drug

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

The drug Kadcyla from Roche combines the established drug Herceptin with a powerful chemotherapy drug and a third chemical linking the medicines together. The chemical keeps the cocktail intact until it binds to a cancer cell, delivering a potent dose of anti-tumor poison.

Cancer researchers say the drug is an important step forward because it delivers more medication while reducing the unpleasant side effects of chemotherapy.

"This antibody goes seeking out the tumor cells, gets internalized and then explodes them from within. So it's very kind and gentle on the patients — there's no hair loss, no nausea, no vomiting," said Dr. Melody Cobleigh of Rush University Medical Center. "It's a revolutionary way of treating cancer."

Cobleigh helped conduct the key studies of the drug at the Chicago facility.

The FDA approved the new treatment for about 20 percent of breast cancer patients with a form of the disease that is typically more aggressive and less responsive to hormone therapy. These patients have tumors that overproduce a protein known as HER-2. Breast cancer is the second most deadly form of cancer in U.S. women, and is expected to kill more than 39,000 Americans this year, according to the National Cancer Institute.

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

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

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

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

FDA specifically approved the drug for patients with advanced breast cancer who have already been treated with Herceptin and taxane, a widely used chemotherapy drug. Doctors are not required to follow FDA prescribing guidelines, and cancer researchers say the drug could have great potential in patients with earlier forms of breast cancer

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

Kadcyla was developed by South San Francisco-based Genentech using drug-binding technology licensed from Waltham, Mass.-based ImmunoGen. The company developed the chemical that keeps the drug cocktail together and is scheduled to receive a $10.5 million payment from Genentech on the FDA decision. The company will also receive additional royalties on the drug's sales.

Shares of ImmunoGen Inc. rose 2 cents to $14.32 in afternoon trading. The stock has ttraded in a 52-wek range of $10.85 to $18.10.

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Asian shares edge higher, yen falls on Bank of Japan report

TOKYO (Reuters) - Asian shares edged higher on Monday but prices were capped by uncertainty facing the global economy after a private survey showed Chinese manufacturing activity retreated from two-year highs this month.

China's HSBC flash purchasing managers' index (PMI) for February slipped to a four-month low of 50.4 and down from January's final reading of 52.3, which had been the best performance since January 2011. But the PMI on Monday showed a fourth consecutive month of expansion, confirming that the world's No. 2 economy is recovering, albeit slowly.

Investors remain wary of fragility in the global economic recovery, having pushed markets broadly higher over the past few months on receding pessimism over the euro zone's debt crisis and U.S. budget woes.

Markets are also pondering whether Italy's weekend elections will produce a stable government, and the implications of that for euro zone cohesion, while Moody's credit downgrade on Britain weighed on confidence in the pound.

Investors await testimony on Tuesday from Fed Chairman Ben Bernanke for further clues of when the Fed may slow or stop buying bonds. Financial markets were rattled last week after minutes of the Fed's January meeting suggested some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected.

The MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was up 0.1 percent, pulled higher by Australian shares <.axjo> which gained 0.6 percent on strong financials.

South Korean shares <.ks11> were nearly flat as the nation's first female president, who has shown willingness to talk down the won, was being inaugurated.

Korean carmakers came under pressure on news that an advocate of aggressive monetary easing was poised to head the Bank of Japan.

The Nikkei newspaper reported the Japanese government is likely to nominate Asian Development Bank President Haruhiko Kuroda and Kikuo Iwata, both vocal advocates of aggressive monetary expansion, as BOJ governor and deputy governor.

The Nikkei <.n225> jumped 2 percent to a 53-month high on Monday as the yen fell to fresh lows since May 2010 against the dollar.

Prime Minister Shinzo Abe on Friday vowed to get the world's third biggest economy growing again as he met with President Barack Obama. The United States and Japan also agreed on language during Abe's visit that could set the stage for Tokyo to soon join negotiations on a U.S.-led regional free trade agreement - the Trans-Pacific Partnership.

"The news of Kuroda (as BOJ nominee) appears to be taken positively by the market, but I think signs of progress towards TPP are vital as it shows Abe is taking leadership in pushing structural reforms, with the TPP being a vital tool to boosting growth," said Tetsuro Ii, the chief executive of Commons Asset Management.

Abe has called on a mix of strong reflationary policies: aggressive monetary easing, huge fiscal spending and pro-growth strategies. Investors have cheered the mix, dubbed "Abenomics," pushing the Nikkei up some 30 percent and the yen down 20 percent against the dollar over the past three months.

Early on Monday, the yen touched a low of 94.77 against the dollar, while the euro rose to a high of 124.83 yen, still off its 34-month peak of 127.71 set early this month.

The dollar fell sharply to below 93 yen last week on media reports that Toshiro Muto, a former financial bureaucrat perceived as less willing to take unconventional steps, was the frontrunner candidate for the top BOJ job.

"The dollar's move this morning is merely a rebound from disappointment on Muto last week. I don't think this topic will be enough to hoist the dollar above 95 yen," said Hiroshi Maeba, head of FX trading Japan at UBS in Tokyo. "No matter who is elected at the BOJ, it will not affect the longer-term trend of a weak yen," he said.

Speculation over the BOJ has been a key factor driving the yen lower recently due to anticipation of strong reflationary measures, but other fundamental factors such as Japan's deteriorating trade balances and signs of firmer U.S. growth also supported a weakening yen trend.

In the U.S., with five days left before $85 billion is slashed from U.S. government budgets, the White House issued more dire warnings about the harm the cuts will do to Americans, breaking down the loss of jobs and services to each of the states.

Wall Street ended up on Friday on strong earnings from Dow component Hewlett-Packard , but the benchmark Standard & Poor's Index <.spx> posted its first weekly decline of the year.

The euro steadied around $1.3190, off Friday's six-week low of $1.31445.

Sterling fell to a 31-month low of $1.5073 early on Monday and a record low against the New Zealand dollar at NZ$1.8025 following Friday's one-notch downgrade of Britain's prized triple-A sovereign rating by Moody's.

Hedge funds and other big speculators cut their bullish bets on U.S. commodities by the most in about 10 months in the week to February 19, just before oil and metals prices tumbled on rumors a commodities fund was dumping positions, data showed on Friday.

U.S. crude was down 0.1 percent to $93.07 a barrel and Brent fell 0.2 percent to $113.92.

(Editing by Eric Meijer)

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2 Palestinians Shot in Clashes With Israeli Settlers

JERUSALEM (AP) — Clashes erupted Saturday in the West Bank, with Jewish settlers shooting two Palestinian demonstrators in the northern village of Kusra, an Israeli military official and Palestinian residents said.

The unrest reflected mounting friction in the West Bank, where Palestinians have faced off against Israeli troops in recent weeks in a series of large demonstrations protesting Israel’s control of the territory in general and in solidarity with four prisoners on hunger strikes in Israeli jails.

Also on Saturday, a Palestinian prisoner died in an Israeli jail, an event that is likely to intensify tensions in the area.

In the West Bank skirmish, Helmi Abdul-Aziz, 24, was shot in the stomach by Jewish settlers, Palestinian demonstrators said. They said settlers also shot Mustafa Hilal, 14, in the foot.

An Israeli military official confirmed that two Palestinians had been shot, apparently by settlers, since the Israeli military forces there were not using live ammunition.

Villagers said the clashes began when a group of Jewish settlers encroached on their village lands and fired guns. They said settlers chased a Palestinian farmer and his family off land, prompting the farmer to call on other villagers to confront the settlers, and men on both sides hurled rocks at one another.

In an Israeli jail on Saturday, Arafat Shalish Shahin Jaradat, a Palestinian prisoner, died apparently of a heart attack, according to an Israeli prison services spokeswoman, Sivan Weizman. She said that Mr. Jaradat had not been on a hunger strike.

Israel’s domestic intelligence agency, the Shin Bet, said that Mr. Jaradat, 30, was arrested last week after he was involved in a rock-throwing attack that injured an Israeli citizen. Mr. Jaradat admitted to the charge, as well to another West Bank rock-throwing episode last year, the Shin Bet said.

A Shin Bet spokesman said that Mr. Jaradat had not been beaten during an interrogation.

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Breaking Dawn - Part 2 Sweeps the Razzies

By Stephen M. Silverman

02/23/2013 at 10:00 PM EST

Taylor Lautner and Mackenzie Foy, in Breaking Dawn – Part 2

Andrew Cooper, SMPSP/Summit

Who's misérable now?

The Twilight Saga: Breaking Dawn – Part 2, Adam Sandler and Rihanna are among the "winners" of the 33rd annual Golden Raspberry Awards – the Razzies – which are not so much handed out as they are thrown at those who are voted as perpetrating Hollywood's worst achievements of the year.

Breaking Dawn – Part 2, the fifth and final installment in Stephenie Meyer's vampire saga, was recognized in seven categories, including worst picture.

The flick's Kristen Stewart was also cited as worst actress; Taylor Lautner, worst supporting actor; Lautner and 12-year-old Mackenzie Foy, worst screen couple; the entire cast, including Robert Pattinson, worst screen ensemble, and Bill Condon, worst director.

In addition, the film, which since opening last November has taken in more than $828 million at the box office, was named worst sequel.

Sandler, who last year monopolized the Razzies – and set a record by winning in 10 categories with the "comedy" Jack & Jill – this year got only two awards: for worst actor of the year and worst screenplay, both for That's My Boy.

Unlike the Oscars, which keep voting tallies a secret and will be handed out Sunday night during a very glamorous event, founder and Head RAZZberry John Wilson announced Razzie recipients Saturday night in the utilitarian Continental Breakfast Room of the Holiday Inn Express Hollywood Walk of Fame hotel, near (and yet so far from) the Dolby Theatre, home of the Academy Awards.

Wilson revealed to the press that although Rihanna, as worst supporting actress in the movie Battleship, won her Razzie by a landslide, worst screenwriter Sandler only beat the authors of Breaking Dawn by a single vote.

It's close shaves like that that really make or break the Razzies.

Adam Sandler, in That's My Boy, and Rihanna, in Battleship

Columbia; Universal

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

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FDA approves new targeted breast cancer drug

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

The drug Kadcyla from Roche combines the established drug Herceptin with a powerful chemotherapy drug and a third chemical linking the medicines together. The chemical keeps the cocktail intact until it binds to a cancer cell, delivering a potent dose of anti-tumor poison.

Cancer researchers say the drug is an important step forward because it delivers more medication while reducing the unpleasant side effects of chemotherapy.

"This antibody goes seeking out the tumor cells, gets internalized and then explodes them from within. So it's very kind and gentle on the patients — there's no hair loss, no nausea, no vomiting," said Dr. Melody Cobleigh of Rush University Medical Center. "It's a revolutionary way of treating cancer."

Cobleigh helped conduct the key studies of the drug at the Chicago facility.

The FDA approved the new treatment for about 20 percent of breast cancer patients with a form of the disease that is typically more aggressive and less responsive to hormone therapy. These patients have tumors that overproduce a protein known as HER-2. Breast cancer is the second most deadly form of cancer in U.S. women, and is expected to kill more than 39,000 Americans this year, according to the National Cancer Institute.

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

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

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

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

FDA specifically approved the drug for patients with advanced breast cancer who have already been treated with Herceptin and taxane, a widely used chemotherapy drug. Doctors are not required to follow FDA prescribing guidelines, and cancer researchers say the drug could have great potential in patients with earlier forms of breast cancer

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

Kadcyla was developed by South San Francisco-based Genentech using drug-binding technology licensed from Waltham, Mass.-based ImmunoGen. The company developed the chemical that keeps the drug cocktail together and is scheduled to receive a $10.5 million payment from Genentech on the FDA decision. The company will also receive additional royalties on the drug's sales.

Shares of ImmunoGen Inc. rose 2 cents to $14.32 in afternoon trading. The stock has ttraded in a 52-wek range of $10.85 to $18.10.

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Investors face another Washington deadline

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

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

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

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

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

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

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

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

OPTIONS BULLS TARGET GAINS

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

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

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

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

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

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

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

EYES ON GDP DATA, APPLE

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

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

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

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

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

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

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Russians Demand Return of Brother of Dead Adopted Boy in Texas

MOSCOW — Russian lawmakers on Friday demanded the return of a 2-year-old boy whose 3-year-old brother, adopted by the same family in Texas, died under murky circumstances in January, prompting allegations of abuse and an investigation.

The younger boy, Kristopher Shatto, who was born Kirill Kuzmin in Russia, remains in the custody of his adoptive parents, Alan and Laura Shatto, in Gardendale, Tex. His biological mother, Yulia V. Kuzmina, who lost custody of the boys because of alcohol addiction, has also demanded Kirill’s return.

But even as the State Duma, the lower house of Parliament, adopted a resolution calling for Kirill to be brought back to Russia, news outlets here reported that Ms. Kuzmina and her boyfriend had gotten into a drunken brawl and were removed from a train by the police while returning to Gdov, a town near the border with Estonia. They had been in Moscow for a television appearance.

Yevgeny Usovich, the owner of a resort on Lake Peipus where Ms. Kuzmina’s boyfriend, Vladimir Antipenko, worked as a bathhouse attendant, said he had seen the couple after their return but was unable to get details of their travel. “It was useless; they were drunk,” Mr. Usovich said in a telephone interview. “What could I find from them?”

In an interview with the Interfax news agency, Mr. Usovich said employees at the Ustye Beach Resort, where Mr. Antipenko worked, were shocked by the television appearance. “The staff here at the club were outraged as they were watching yesterday’s television program,” Mr. Usovich said. “And all of them said the child must not be handed back over to this couple.”

The older boy, Max Shatto, who was born Maksim Kuzmin, died on Jan. 21, and news of his death set off a huge outcry this week in Russia, which late last year banned adoptions by American citizens. Texas child welfare officials said they had received a report of abuse on the same day that Max died.

On Thursday, Shirley Standefer, chief investigator for the Ector County Medical Examiner’s Office in Texas, said bruises were found on Max’s lower abdomen. An autopsy was conducted on Jan. 23, and it normally takes 8 to 12 weeks to get results, she said. The chief medical examiner will then rule on the cause of death, she added, possibly early next week.

Russia’s child rights commissioner, Pavel A. Astakhov, who had said he would help Ms. Kuzmina regain custody of Kirill, posted a statement on his Web site on Friday seeming to backtrack after the reports of her drunkenness. He said that a decision on restoring parental rights could be made only by a court and that the bigger issue was the way American courts had mishandled abuse cases involving adopted Russian children.

“I repeat once again — the final decision is made by the court only,” Mr. Astakhov said in his statement. “Unfortunately, the debate around the death of little Maksim Kuzmin does not solve the main problem — to restore justice.”

Some Russian officials quickly accused the adoptive mother, Ms. Shatto, of beating the boy to death, but they have since pulled back and said she was guilty of negligence at a minimum.

President Valdimir V. Putin’s spokesman, Dmitri S. Peskov, on Friday urged the public to wait for the forensic results. “To qualify it is a murder or as an accident is not allowed while there is still no evidence,” Mr. Peskov said on Dozhd, a television station. “In this case, I would consider it necessary to temper emotions a bit.”

Earlier in the day, the American ambassador to Russia, Michael A. McFaul, posted a statement on his blog in English and Russian calling Max’s death a “tragedy” but urging that it not be exploited. In the post, Mr. McFaul said he was “troubled” by how some Russian news outlets were portraying the United States and Americans in the context of the Shatto case.

Ms. Shatto has told investigators that she had left the boys playing outside unattended and returned to find Max lying on the ground, unresponsive. He died later that day at a hospital.

In the resolution adopted on Friday, Russian lawmakers urged American officials to regard the issue of adopted Russian children in the United States as an “emergency situation requiring immediate reaction on the part of all government branches of our states.”

Such adoption cases are now covered by a bilateral agreement between the two countries — ratified last year — that sets forth a number of requirements for oversight and cooperation. Along with the adoption ban, which took effect on Jan. 1, the Russian government announced that it would terminate the existing agreement on adoptions on Jan. 1, 2014, following a required one-year notification period.

Mr. Putin called the adoption ban an appropriate retaliation for an American law that seeks to punish Russians accused of violating human rights.

The Russian law was named for Dima Yakovlev, a 21-month-old boy who was adopted from Russia and died of heatstroke in Virginia in July 2008, after being left in a parked car for nine hours by his father, Miles Harrison. Mr. Harrison was acquitted of manslaughter charges by a judge who called the death a tragic accident.

Dozens of American families are still hoping to complete adoptions that were in process when the ban took effect. The issue has become a major source of tension in an increasingly troubled diplomatic relationship. Officials have said that Secretary of State John Kerry and the Russian foreign minister, Sergey V. Lavrov, will discuss the Shatto case among other issues at a meeting next week in Berlin.

Staci Semrad contributed reporting from Lubbock, Tex.

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