Wall Street little changed before next "cliff" signal

NEW YORK (Reuters) - Stocks were little changed on Tuesday as the market awaited developments in negotiations in Washington to avert a "fiscal cliff" that could push the U.S. economy into recession.

Republicans in Congress proposed steep spending cuts to bring down the budget deficit on Monday but gave no ground on President Barack Obama's call to raise taxes on the wealthiest Americans, and the proposal was quickly dismissed by the White House.

The market has been subject to swings in reaction to the proposals floated so far by politicians. Still, many investors expect the two sides to come up with a deal before the year-end deadline, which could trigger a rally in equities.

"Investors everywhere are focused on what is happening here related to the fiscal cliff and the risk that nothing will happen," said Gail Dudack, Chief Investment Strategist, Dudack Research Group in New York.

"From what I have seen, there is a consensus that something will happen. Maybe if it is not ideal, something will happen."

Differences within the Republican Party over how to engage with the Democrats came to the fore on Tuesday as one senator opposed to raising taxes lashed out at House Speaker and fellow Republican John Boehner for proposing to increase revenue by closing some tax loopholes.

Despite the sudden moves in the market, a measure of investor anxiety has held surprisingly flat.

The CBOE volatility index <.vix>, a gauge of market anxiety, was at 17 but has not traded above 20 since July following its 2012 high near 28 hit in June. The VIX's 10-day Average True Range, an internal volatility measure, is at its lowest since early 2007.

Obama will meet with U.S. governors at the White House on Tuesday to talk about the fiscal cliff, a $600 billion package of tax hikes and federal spending cuts that would begin January 1.

The president is also expected to talk about the fiscal cliff during an interview scheduled for 12:30 p.m. (1730 GMT) on Bloomberg TV.

Coach became the latest company to advance the date of its next dividend payment. Expectations of higher taxes on dividends kicking in in 2013 have pushed many companies to pay special dividends this year or advance their next pay-back to investors. Shares of the upscale leather-goods maker shed 1.6 percent to $57.25.

The Dow Jones industrial average <.dji> rose 27.92 points, or 0.22 percent, to 12,993.52. The S&P 500 <.spx> edged up 0.44 points, or 0.03 percent, to 1,409.90. The Nasdaq Composite <.ixic> fell 4.44 points, or 0.15 percent, to 2,997.76.

Darden Restaurants Inc plunged 10.1 percent to $47.14 as the worst performer on the S&P 500 after warning its latest quarter would miss expectations after unsuccessful promotions led to a decline in sales at its Olive Garden, Red Lobster and LongHorn Steakhouse chains.

In contrast, Big Lots Inc jumped 8 percent to $30.28 after the close-out retailer posted a smaller-than-expected loss and boosted its full-year adjusted earnings forecast.

Toll Brothers shares advanced 0.3 percent to $32.53 after the largest U.S. luxury homebuilder reported a higher quarterly profit and said new orders rose sharply.

MetroPCS Communications shares dropped 6.5 percent to $10.07 after Sprint Nextel appeared unlikely to make a counter-offer for the wireless service provider.

Shares of Pep Boys-Manny Moe and Jack slumped 12.5 percent at $9.34 a day after the release of the auto parts retailer's results.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Suspected Gaza Collaborators Face a Grisly Fate

RAFAH, Gaza Strip — When Fadel Shalouf’s family went to pick up his body at the morgue the day after he was executed on a busy Gaza street corner, they found his hands still cuffed behind his back. Hamas, the militant faction that rules Gaza, did not provide a van to carry the body to burial, so they laid him on two men’s laps in the back of a sedan.

It was an undignified end to a short, shrouded life. Mr. Shalouf, his family insisted, was an illiterate fisherman with a knack for designing kites when he was arrested at 19 by Gaza’s internal security service. Yet he was convicted in a Hamas court in January 2011 of providing Israel with information that led to the 2006 assassination of Abu Attaya, commander of the Popular Resistance Committees.

During last month’s intense eight-day battle with Israel, the military wing of the Hamas government brutally and publicly put an end to Mr. Shalouf, 24, and six other suspected collaborators. The vigilante-style killings by masked gunmen — with one body dragged through a Gaza City neighborhood by motorcycle and another left for crowds to gawk over in a traffic circle — highlighted the pathetic plight of collaborators, pawns preyed on by both sides in the long-running Israeli-Palestinian conflict.

“Fadel lived poor and died poor,” said his cousin Ahmed Shalouf, 28. “They left the bodies for a few hours in the streets, people spitting on them, throwing stones. They did not execute only Fadel. They executed all of us.”

For Israel, despite its advanced technology for tracking terrorists, human sources remain an essential intelligence tool that allows for pinpoint strikes like the one that felled Ahmed al-Jabari, operations commander of Hamas’s Al Qassam Brigades, at the start of the recent escalation. To Hamas, they are the enemy within, and vigorous prosecution as well as the occasional high-profile lynching are powerful psychological tools to enforce loyalty and squelch dissent.

Former intelligence officials and experts on the phenomenon said many collaborators are struggling souls who are blackmailed into service by an Israeli government with great leverage over their lives. Some are enlisted when they apply for permits to seek medical treatment in Israel, for example, or in exchange for better conditions or early release from Israeli jails. Others are threatened with having behavior shunned in their religious Islamic communities — alcohol use, perhaps, or adultery — exposed.

“There is no substitute to a human source, because a human source goes into their house, sometimes even into their minds,” said Yaakov Peri, a former head of the Shin Bet, Israel’s domestic intelligence agency. “With all the technology — drones, you name it — you need a background, and you need the assistance from a human source.”

Mr. Peri said Palestinian collaborators might be given money for expenses or a small salary, but “you’ll never be a rich guy.”

Hillel Cohen, a research fellow at the Truman Institute for the Advancement of Peace at the Hebrew University in Jerusalem, who has written two books on the subject, said some Gaza collaborators “do it just for some money” and “some to be part of a big story”; few are actually supportive of Israel, he said, but many have problems with Hamas.

“I interviewed a lot of collaborators, and they have a kind of inferiority complex,” Mr. Cohen explained. “They see the West, Israel, as much better than the Arab. I hear expressions like, ‘We’re worth nothing.’ Sometimes it comes from there, and sometimes it’s part of what the Israeli officers put in their minds.”

Collaboration has underpinned Israeli-Palestinian relations since before there was a modern state of Israel, dating back at least to the Jewish underground that operated during the British Mandate era in the 1930s. The Oslo Accords signed by Israeli and Palestinian negotiators in 1994 even made two villages — one in Gaza, one in the West Bank — safe refuges for about 1,500 Bedouins suspected of spying.

The very definition of collaboration has expanded in recent years. Some in Hamas and more militant groups consider the Palestinian Authority to be aiding the enemy when it coordinates security services in the West Bank with Israel. Since Hamas took control of Gaza in 2007 after winning elections, members of the rival Fatah faction who live here have almost universally been under suspicion. Selling land to Jews can be punishable by death.

Fares Akram contributed reporting from Gaza, and Irit Pazner Garshowitz from Jerusalem.

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West Point Hosts First Same-Sex Marriages

By Julia Haskins

12/03/2012 at 12:35 PM EST

Brenda "Sue" Fulton and Penelope Gnesin

Jeff Sheng/Outserve-SLDN/AP

West Point Military Academy has made history by hosting the institution's first same-sex marriages. 

The 210-year-old Academy hosted the nuptials of Brenda "Sue" Fulton, a 53-year-old West Point graduate, and Penelope Gnesin, 52, at the Academy's Cadet Chapel on Dec. 1. "It was such a sacred, joyous day," Fulton told CNN. 

The chapel was the first place Fulton heard the Cadet Prayer – which includes the line, "make us to choose the harder right instead of the easier wrong" – and it resonated with her.

"As both Penny and I worked to support LGBT military people, those principles were always in front of us," Fulton said. "To be able to celebrate this with so many of our straight and gay military folks, bi and trans, was really overwhelming."

Prior to Fulton and Gnesin's ceremony, Army 1st Lt Ellen Schick and Shannon Simpson wed in West Point's original Old Cadet Chapel on Nov. 24. 

"Ellen is very proud to serve her country and wanted a military wedding," Simpson told OutServe Magazine. "We felt that we should be allowed the same opportunity to marry on a military post as any heterosexual military couple."

The marriages come after two major victories for the LGBT community. In 2011, New York legalized same-sex marriage and the military's "Don't Ask, Don't Tell" policy was repealed.

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Explainer: Why was pregnant duchess hospitalized?

LONDON (AP) — While morning sickness in pregnant women is common, the problem the Duchess of Cambridge has been hospitalized with is not.

In a statement Monday, palace officials said she was hospitalized with hyperemesis gravidarum, a potentially dangerous type of morning sickness where vomiting is so severe no food or liquid can be kept down. Palace officials said the duchess was expected to remain hospitalized for several days and would require a period of rest afterwards.

"It's not unusual for pregnant women to get morning sickness, but when it gets to the point where you're dehydrated, losing weight or vomiting so much you begin to build up (toxic) products in your blood, that's a concern," said Dr. Kecia Gaither, director of maternal fetal medicine at Brookdale University and Medical Center in New York.

The condition is thought to affect about one in 50 pregnant women and tends to be more common in young women, women who are pregnant for the first time, those expecting multiple babies and in non-smokers. Gaither said that fewer than one percent of women with the condition need to be hospitalized.

Doctors aren't sure what causes it but suspect it could be linked to hormonal changes or nutritional problems.

Women admitted to the hospital with hyperemesis gravidarum are usually treated with nutritional supplements and given fluids intravenously to treat dehydration. Dr. Dagni Rajasingam, a spokeswoman for the Royal College of Obstetricians and Gynaecologists, said most women hospitalized with the condition are discharged within several days.

"It depends on how well the woman is keeping fluids down," she said.

If the problem is recognized and treated early, doctors say there are no long-term effects for either the mother or the child. Left untreated, the mother could be at risk of developing neurological problems — including seizures — or risk delivering the baby early.

Gaither said the condition usually subsides by the second trimester.

"The rest of the pregnancy could be entirely uneventful," she said, adding that pregnant women treated for the condition are usually advised to avoid fatty foods that could aggravate the problem.

Gaither said the duchess would probably be able to meet her usual royal obligations by her second trimester.

"She should be able to meet all her public obligations soon," she said, advising her to take her vitamins and ensure there are no other underlying health problems. "She should just be looking forward to having a healthy little plump person."

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Wall Street turns flat as U.S. factory data offsets China

NEW YORK (Reuters) - Stocks barely budged on Monday, with the S&P 500 and Nasdaq trimming early gains as disappointing U.S. factory numbers dented optimism spurred by positive data on China's economy.

Output by China's factories grew in November for the first time in more than a year, data showed. But that encouraging signal about the health of the world's second-largest economy was offset by a surprising contraction in U.S. manufacturing, which fell in November to its lowest level in more than three years, according to the Institute for Supply Management.

The market's reaction to the ISM data was somewhat muted, however, as concerns about budget dealings in Washington on the "fiscal cliff" remain the primary focus of investors. Political haggling continues over how to deal with large automatic spending cuts and tax hikes scheduled to kick in next year that could tip the U.S. economy back into recession.

"At this point, all you can say about the data is they are discounting it," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"So barring some catastrophe here in terms of the fiscal cliff, we look pretty stable."

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

The PHLX Europe sector index <.xex> advanced 0.6 percent.

"The general feeling underneath here is things are improving - Europe appears to be improving, at least politically getting their act together," Mendelsohn said.

The Dow Jones industrial average <.dji> shed 10.45 points, or 0.08 percent, to 13,015.13. The Standard & Poor's 500 Index <.spx> inched up just 0.62 of a point, or 0.04 pct to 1,417.80. The Nasdaq Composite Index <.ixic> added 3.68 points, or 0.12 percent, to 3,013.92.

The S&P 500 briefly moved above its 50-day moving average at about 1,420, a level that the index has been below since October 22, and now serving as a key resistance point for equities.

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

Dell shares rose 5.8 percent to $10.19 as one of the biggest percentage gainers in both the S&P 500 and Nasdaq 100 <.ndx> after Goldman Sachs upgraded its view on the stock to "buy" from "sell."

Singapore Airlines said it was in talks with interested parties to sell its 49 percent stake in British carrier Virgin Atlantic, with sources saying that Delta Air Lines was among the potential suitors. Delta shares fell 1.8 percent to $9.82.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry and Jan Paschal)

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Taliban Bombers Attack Air Base in Afghanistan

KABUL, Afghanistan — KABUL, Afghanistan — Early Sunday morning, Taliban forces attacked a large coalition airfield in eastern Afghanistan early Sunday morning, detonating threecar bombs near the entrance of the base before sparking a two-hour gun battle that claimed the lives of nine insurgents, three Afghan security guards and at least four civilians whose vehicle was caught in the cross-fire, Afghan officials and witnesses said.

Noorullah Shirzada/Agence France-Presse — Getty Images

Taliban attackers detonated three car bombs near the entrance of a coalition airbase in eastern Afghanistan on Sunday.

Disguised in coalition military uniforms, Taliban fighters attempted to enter the base following the initial suicide blasts, which took place just before 6 a.m., but were repelled by a battery of coalition firepower that included helicopter gunships, officials said. The confrontation wounded fewer than 10 coalition service members according to official reports, though by late Sunday it remained unclear exactly how many had been hurt or how severely. At least one member of the Afghan military was killed in the fighting.

The Taliban quickly claimed responsibility for the operation, claiming to have killed “tens” of foreign forces, though the insurgents routinely overstate the deadliness of their attacks.

But the coordinated assault, which left the entry to the base strewn with the bloody remains of the bombers, was a potent reminder of the Taliban’s determination to continue the fight. As the coalition forces wind down the 11-year war, with Western combat troops already withdrawing, the Taliban attacks serve as a consistent reminder that they are not going anywhere — and that their firepower remains. How successful such defenses will be after the 2014 withdrawal of coalition forces is a question on the minds of many Afghans.

The base, known as Forward Operating Base Fenty, is primarily American and is one of the larger airfields in eastern Afghanistan. Like other large coalition bases in the country, Fenty has been attacked before, including in February of this year, when a suicide blast killed 9 Afghans. The assaults have, in most cases, been repulsed before insurgents could fight their way inside the bases, and coalition casualties have been minimal, as appears to have been the case on Sunday.

But the Afghans who work or live near the base have not been so fortunate. Afghan officials said that two of the civilians killed were doctors, their car riddled by gunfire about 50 yards from the base. The doctors had been on their way to work in Jalalabad, the capital of Nangarhar Province, said Hajji Niamatullah Khan, the district governor of Behsood. In addition, at least three private security guards on duty at the outer perimeter at the base were killed in the attack, he said.

Coalition forces had few details about the extent of the damage from the Taliban assault. Efforts to determine the number of servicemen, civilians and insurgents killed or wounded remained ongoing, Maj. Martyn Crighton said.

Zabiullah Mujahid, a Taliban spokesman, said medical evacuation helicopters could be seen ferrying dead and wounded American soldiers away from the scene of the attack, “which shows that heavy casualties were inflicted” by the attackers.

He also claimed that a Toyota sport utility vehicle packed with explosives had leveled one of the guard towers at the base, and added that some of the attackers were wearing “foreign” military uniforms, a tactic the Taliban have employed in previous assaults on coalition bases. An official from the American-led coalition confirmed that at least some of the attackers wore coalition uniforms.

The last major assault against a coalition base was in September, when the Taliban blew up eight Harrier attack jets and killed two Marines at Camp Bastion in Helmand Province. The militants, wearing American Army uniforms, caused more than $200 million in damage in that attack.

Sharifullah Sahak contributed reporting.

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Verizon may soon launch Samsung Galaxy Camera with 4G LTE

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Larry Hagman, Boy Meets World Re-Boot Get Top Reactions This Week

12/02/2012 at 12:25 PM EST

Danielle Fishel and Ben Savage; Larry Hagman

Everett, Hulton Archive/Getty

It was a post-Thanksgiving week of delightful highs and solemn lows. From the passing of favorite actors to confusion over the recent Two and a Half Men drama, this week's stories left you experiencing a whirlwind of emotions on PEOPLE.com.

As always, you've been reacting in droves, telling us what you love, what makes you mad and what leaves you to LOL.

Check out the stories with top reactions on the site this week, and keep clicking on the emoticons at the bottom of every story to tell us what you think!

Nostalgic readers loved the promise of a Boy Meets World spinoff getting the green light. Fans of the original show were thrilled to see that Ben Savage and Danielle Fishel will film for the Girl Meets World pilot.

The entertainment world lost some beloved members this week. Larry Hagman, best known as J.R. Ewing on Dallas, lost his battle with throat cancer at 81. Deborah Raffin of 7th Heaven also succumbed to leukemia at 59.

Celebrities are often ridiculed for giving their children bizarre names, but the Jameson family may have outdone them all by naming their baby girl "Hashtag". You agreed: Leave social media terms to the Internet.

Readers weren't sure what to make of Angus T. Jones's shocking rant about his show, Two and a Half Men. By calling the CBS sitcom "filth," and urging viewers to stop watching, Jones is said to be remaining with the program.

News of Demi Moore's new beau had readers snickering. But Moore, who is no stranger to dating younger men, seems to have no issue with dating 26-year-old art dealer Vito Schnabel.

Check back next week for another must-read roundup, and see what readers are reacting to every day here.

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Asperger's dropped from revised diagnosis manual

CHICAGO (AP) — The now familiar term "Asperger's disorder" is being dropped. And abnormally bad and frequent temper tantrums will be given a scientific-sounding diagnosis called DMDD. But "dyslexia" and other learning disorders remain.

The revisions come in the first major rewrite in nearly 20 years of the diagnostic guide used by the nation's psychiatrists. Changes were approved Saturday.

Full details of all the revisions will come next May when the American Psychiatric Association's new diagnostic manual is published, but the impact will be huge, affecting millions of children and adults worldwide. The manual also is important for the insurance industry in deciding what treatment to pay for, and it helps schools decide how to allot special education.

This diagnostic guide "defines what constellations of symptoms" doctors recognize as mental disorders, said Dr. Mark Olfson, a Columbia University psychiatry professor. More important, he said, it "shapes who will receive what treatment. Even seemingly subtle changes to the criteria can have substantial effects on patterns of care."

Olfson was not involved in the revision process. The changes were approved Saturday in suburban Washington, D.C., by the psychiatric association's board of trustees.

The aim is not to expand the number of people diagnosed with mental illness, but to ensure that affected children and adults are more accurately diagnosed so they can get the most appropriate treatment, said Dr. David Kupfer. He chaired the task force in charge of revising the manual and is a psychiatry professor at the University of Pittsburgh.

One of the most hotly argued changes was how to define the various ranges of autism. Some advocates opposed the idea of dropping the specific diagnosis for Asperger's disorder. People with that disorder often have high intelligence and vast knowledge on narrow subjects but lack social skills. Some who have the condition embrace their quirkiness and vow to continue to use the label.

And some Asperger's families opposed any change, fearing their kids would lose a diagnosis and no longer be eligible for special services.

But the revision will not affect their education services, experts say.

The new manual adds the term "autism spectrum disorder," which already is used by many experts in the field. Asperger's disorder will be dropped and incorporated under that umbrella diagnosis. The new category will include kids with severe autism, who often don't talk or interact, as well as those with milder forms.

Kelli Gibson of Battle Creek, Mich., who has four sons with various forms of autism, said Saturday she welcomes the change. Her boys all had different labels in the old diagnostic manual, including a 14-year-old with Asperger's.

"To give it separate names never made sense to me," Gibson said. "To me, my children all had autism."

Three of her boys receive special education services in public school; the fourth is enrolled in a school for disabled children. The new autism diagnosis won't affect those services, Gibson said. She also has a 3-year-old daughter without autism.

People with dyslexia also were closely watching for the new updated doctors' guide. Many with the reading disorder did not want their diagnosis to be dropped. And it won't be. Instead, the new manual will have a broader learning disorder category to cover several conditions including dyslexia, which causes difficulty understanding letters and recognizing written words.

The trustees on Saturday made the final decision on what proposals made the cut; recommendations came from experts in several work groups assigned to evaluate different mental illnesses.

The revised guidebook "represents a significant step forward for the field. It will improve our ability to accurately diagnose psychiatric disorders," Dr. David Fassler, the group's treasurer and a University of Vermont psychiatry professor, said after the vote.

The shorthand name for the new edition, the organization's fifth revision of the Diagnostic and Statistical Manual, is DSM-5. Group leaders said specifics won't be disclosed until the manual is published but they confirmed some changes. A 2000 edition of the manual made minor changes but the last major edition was published in 1994.

Olfson said the manual "seeks to capture the current state of knowledge of psychiatric disorders. Since 2000 ... there have been important advances in our understanding of the nature of psychiatric disorders."

Catherine Lord, an autism expert at Weill Cornell Medical College in New York who was on the psychiatric group's autism task force, said anyone who met criteria for Asperger's in the old manual would be included in the new diagnosis.

One reason for the change is that some states and school systems don't provide services for children and adults with Asperger's, or provide fewer services than those given an autism diagnosis, she said.

Autism researcher Geraldine Dawson, chief science officer for the advocacy group Autism Speaks, said small studies have suggested the new criteria will be effective. But she said it will be crucial to monitor so that children don't lose services.

Other changes include:

—A new diagnosis for severe recurrent temper tantrums — disruptive mood dysregulation disorder. Critics say it will medicalize kids' who have normal tantrums. Supporters say it will address concerns about too many kids being misdiagnosed with bipolar disorder and treated with powerful psychiatric drugs. Bipolar disorder involves sharp mood swings and affected children are sometimes very irritable or have explosive tantrums.

—Eliminating the term "gender identity disorder." It has been used for children or adults who strongly believe that they were born the wrong gender. But many activists believe the condition isn't a disorder and say calling it one is stigmatizing. The term would be replaced with "gender dysphoria," which means emotional distress over one's gender. Supporters equated the change with removing homosexuality as a mental illness in the diagnostic manual, which happened decades ago.

___

AP Medical Writer Lindsey Tanner can be reached at http://www.twitter.com/LindseyTanner .

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Cliff fight may knock out December rally

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

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

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

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

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

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

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

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

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

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

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

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

"And that is what is grabbing the markets."

BE CONTRARY AND MAKE MERRY

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

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

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

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

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

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

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

SOME FEEL THE BIG CHILL

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

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

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

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

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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