Asia shares at 2012 high, markets await U.S. jobs data

TOKYO (Reuters) - Asian shares touched fresh 16-month highs on Friday as investors awaited U.S. nonfarm payrolls data due later in the day, with sentiment underpinned by signs that China's economy is stabilizing.

European shares will likely gain modestly, with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> to open as much as 0.4 percent higher. A 0.1 percent rise in U.S. stock futures hinted at a steady Wall Street open. <.l><.eu><.n/>

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> rose 0.5 percent, and was set for its third-straight weekly gain with a 1.3 percent advance. The index has gained about 17 percent year-to-date, compared to a loss of nearly 18 percent last year.

Hong Kong shares <.hsi> reached a 16-month peak and have climbed some 21 percent so far this year despite facing bouts of pressure from sputtering mainland Chinese markets. Shanghai shares <.ssec> jumped 1.2 percent.

"People were gloomier at this time last year, but now, judging from the flows, they seem to be very optimistic and positioning for policy changes next year in China," said Larry Jiang, chief investment strategist at Guotai Junan International Securities.

Australian shares <.axjo> rose 0.9 percent to a six-week closing high, with top miners supported by rebounding iron ore prices.

Investors will focus on a slew of Chinese data due over the weekend including industrial output, after recent manufacturing surveys pointed to a recovery from lows earlier this year.

"One of the reasons for the gains is better news we've seen from China and expectations the economy there has stabilized and growth has improved modestly," said Michael McCarthy, chief market strategist at CMC Markets.

Despite some positive signs in the world's second-largest economy, the Asian Development Bank slightly cut its 2012 and 2013 growth estimates for developing Asia on Friday as frail global demand continues to drag on the region.

Buoyed by strong domestic consumption and government spending, developing Asian economies have shown relatively more resilience compared with developed and more export-reliant economies such as Japan and south Korea.

South and Southeast Asian bourses have outperformed, with a 32 percent year-to-date surge in the Philippines <.psi>, a 30 percent gain in Thailand <.seti>, Indian shares <.bsesn> rising 26 percent and Indonesia <.jkse> up 12 percent to date.

Japan's Nikkei stock average <.n225> was barely changed, hovering near seven-month highs hit on Thursday. <.t/>

The dollar traded at 82.47 yen, sticking close to a 7-1/2-month high of 82.84 hit on November 22.

U.S. HOPES

As superstorm Sandy disrupted U.S. economic activity, nonfarm payrolls in November are expected to have increased only 93,000, compared to October's 171,000 job gain, a Reuters survey of economists showed. The unemployment rate is seen holding steady at 7.9 percent.

"A soft number should reinforce the case for the Fed doves ahead of next week's FOMC meeting where QE is likely to be increased in order to at least offset the expiration of Operation Twist. Hence a soft report should hurt USD and vice versa," Sean Callow, senior currency strategist at Westpac bank in Sydney, said in a note.

At its December 11-12 meeting, the Federal Reserve is expected to announce a new round of Treasury bond purchases to reinforce quantitative easing, replacing the expiring programme called Operation Twist, under which it bought $45 billion of longer-dated bonds a month while selling its shorter-date holdings.

With little to show after a month of posturing, the White House and Republicans in Congress dropped hints on Thursday that they had resumed low-level private talks on breaking the stalemate over the "fiscal cliff.

Markets have been keeping up hope that Washington would eventually avert some $600 billion of tax hikes and spending cuts scheduled to start in January. Economists have warned that if Congress failed to reach an agreement, the U.S. economy could slip back into recession, further weighing on the fragile global economy.

EURO ON DEFENSIVE

The euro steadied at around $1.2968. The euro slid nearly 1 percent to a one-week low of $1.2950 on Thursday in its biggest one-day loss in a month on prospects for interest rate cuts next year.

European Central Bank President Mario Draghi said on Thursday policymakers had held a wide discussion on interest rates, including negative deposit rates, which means effectively charging depositors rather than paying them interest, with an aim of forcing banks to put their money to work elsewhere.

The ECB also projected gross domestic product next year could range from a contraction of 0.9 percent to growth of 0.3 percent, suggesting contraction is far more likely than not.

"It is unusual that a negative growth projection for the next year is offered before the end of the current year, but with such a view, markets are naturally pricing in a interest rate cut," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.

He expected the euro to remain vulnerable with the risk of falling back to $1.2 at some point, but the single currency appeared to be supported currently by year-end repatriation flows.

U.S. crude futures inched up 0.4 percent to $86.58 a barrel and Brent rose 0.2 percent to $107.29.

A firm tone in broad assets soothed sentiment for Asian credit markets, narrowing the spreads on the iTraxx Asia ex-Japan investment-grade index by 2 basis points.

(Additional reporting by Clement Tan and Vikram Subhedar in Hong Kong and Maggie Lu Yueyang; Editing by Kim Coghill)

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Op-Docs: ‘Forgotten in Iraq’

By Beth Murphy

Forgotten in Iraq:
Kirk Johnson, a former U.S.A.I.D. employee, struggles to help resettle Iraqis whose lives are in danger because of their loyalty to the United States. Is President Obama to blame?

As an American, as a journalist and simply as a person who tries to maintain some moral clarity in my life, I felt compelled in this Op-Doc video to tell the story of the workers in Iraq whose lives have been endangered or destroyed because of their loyalty to the United States.

I serve on the board of the International Institute of New England, an organization that helps settle refugees in the Boston area. In early 2007, we heard that our organization would soon be aiding a flood of Iraqi refugees. Many would be men and women who had worked directly for the United States government while we were at war in their country. They were Iraqis who threw their lot in with the Americans, serving as translators and guides, administrative staff members and procurement experts. But as the conflict dragged on, radical militias began to target the Iraqi workers and their families.

Very few of these Iraqi allies were receiving any help from the United States. In Boston, a trickle of refugees arrived, but not the flood we had imagined — and most had no United States affiliation. In Washington a group of politicians, including Barack Obama, then a very eloquent presidential candidate, campaigned for “keeping faith” with the Iraqis who kept faith with us. I hoped, as did many Iraqi workers whose lives were in danger, that an Obama presidency would usher in an airlift rescue for America’s Iraqi employees. Britain and Denmark, among other allies, had already offered their own Iraqi workers a path to safety. President Bill Clinton demonstrated in 1996 that something like this could be done, when he ordered an airlift of 6,600 Iraqi Kurds to Guam for processing to be resettled in the United States.

Unfortunately, neither a dramatic airlift nor a steady wave of relief was in the cards. In the five years since this crisis first came into my life, I’ve documented the extraordinary efforts of Kirk Johnson, a former U.S.A.I.D. employee, as he champions the causes of his former co-workers in Iraq and their peers. Despite Mr. Johnson’s efforts, there have been far too few resolutions to the stories of persecution and hostility toward our government’s Iraqi allies. Without firm, committed guidance from the president who once spoke so powerfully on their behalf, I am deeply concerned that many of these men and women will remain in danger.

Beth Murphy is a documentary filmmaker and the founder of Principle Pictures. She directed and produced “The List,” a feature documentary that will be shown on public television in 2013.

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Frank Ocean, Taylor Swift Collect Grammy Nominations

12/06/2012 at 01:00 AM EST

How FUN!

The Grammys handed out their nominations Wednesday night at a concert in Nashville and there was a decidedly youthful feel: Taylor Swift earned a nod for record of the year and the band FUN joined Frank Ocean with the trifecta of album and record of the year and best new artist.

In the country categories, Blake Shelton is up against Carrie Underwood for best solo performance and Miranda Lambert was nominated for best album.

Here are some of the major nominations. For a complete list go to Grammy.com:

Album of the Year:
El Camino – The Black Keys
Some Nights– FUN.
Babel – Mumford & Sons
Channel Orange – Frank Ocean
Blunderbuss – Jack White

Record of the Year:
Lonely Boy – The Black Keys
Stronger (What Doesn't Kill You) – Kelly Clarkson
We Are Young – FUN. featuring Janelle Monáe
Somebody That I Used To Know – Gotye Featuring Kimbra
Thinkin Bout You – Frank Ocean
We Are Never Ever Getting Back Together – Taylor Swift

Best New Artist:
Alabama Shakes
FUN
Hunter Hayes
The Lumineers
Frank Ocean

Song Of The Year:
"The A Team" – Ed Sheeran, songwriter (Ed Sheeran)
"Adorn" – Miguel Pimentel, songwriter (Miguel)
"Call Me Maybe" – Tavish Crowe, Carly Rae Jepsen & Josh Ramsay, songwriters (Carly Rae Jepsen)
"Stronger (What Doesn't Kill You)" – Jörgen Elofsson, David Gamson, Greg Kurstin & Ali Tamposi, songwriters (Kelly Clarkson)
"We Are Young" – Jack Antonoff, Jeff Bhasker, Andrew Dost & Nate Ruess, songwriters (FUN. featuring Janelle Monáe)

Best Country Solo Performance:
"Home" – Dierks Bentley
"Springsteen" – Eric Church
"Cost Of Livin'" – Ronnie Dunn
"Wanted" – Hunter Hayes
"Over" – Blake Shelton
"Blown Away" – Carrie Underwood

Best Country Album:
Uncaged – Zac Brown Band
Hunter Hayes – Hunter Hayes
Living For A Song: A Tribute To Hank Cochran – Jamey Johnson
Four The Record– Miranda Lambert
The Time Jumpers – The Time Jumpers

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Study could spur wider use of prenatal gene tests

A new study sets the stage for wider use of gene testing in early pregnancy. Scanning the genes of a fetus reveals far more about potential health risks than current prenatal testing does, say researchers who compared both methods in thousands of pregnancies nationwide.

A surprisingly high number — 6 percent — of certain fetuses declared normal by conventional testing were found to have genetic abnormalities by gene scans, the study found. The gene flaws can cause anything from minor defects such as a club foot to more serious ones such as mental retardation, heart problems and fatal diseases.

"This isn't done just so people can terminate pregnancies," because many choose to continue them even if a problem is found, said Dr. Ronald Wapner, reproductive genetics chief at Columbia University Medical Center in New York. "We're better able to give lots and lots of women more information about what's causing the problem and what the prognosis is and what special care their child might need."

He led the federally funded study, published in Thursday's New England Journal of Medicine.

A second study in the journal found that gene testing could reveal the cause of most stillbirths, many of which remain a mystery now. That gives key information to couples agonizing over whether to try again.

The prenatal study of 4,400 women has long been awaited in the field, and could make gene testing a standard of care in cases where initial screening with an ultrasound exam suggests a structural defect in how the baby is developing, said Dr. Susan Klugman, director of reproductive genetics at New York's Montefiore Medical Center, which enrolled 300 women into the study.

"We can never guarantee the perfect baby but if they want everything done, this is a test that can tell a lot more," she said.

Many pregnant women are offered screening with an ultrasound exam or a blood test that can flag some common abnormalities such as Down syndrome, but these are not conclusive.

The next step is diagnostic testing on cells from the fetus obtained through amniocentesis, which is like a needle biopsy through the belly, or chorionic villus sampling, which snips a bit of the placenta. Doctors look at the sample under a microscope for breaks or extra copies of chromosomes that cause a dozen or so abnormalities.

The new study compared this eyeball method to scanning with gene chips that can spot hundreds of abnormalities and far smaller defects than what can be seen with a microscope. This costs $1,200 to $1,800 versus $600 to $1,000 for the visual exam.

In the study, both methods were used on fetal samples from 4,400 women around the country. Half of the moms were at higher risk because they were over 35. One-fifth had screening tests suggesting Down syndrome. One-fourth had ultrasounds suggesting structural abnormalities. Others sought screening for other reasons.

"Some did it for anxiety — they just wanted more information about their child," Wapner said.

Of women whose ultrasounds showed a possible structural defect but whose fetuses were called normal by the visual chromosome exam, gene testing found problems in 6 percent — one out of 17.

"That's a lot. That's huge," Klugman said.

Gene tests also found abnormalities in nearly 2 percent of cases where the mom was older or ultrasounds suggested a problem other than a structural defect.

Dr. Lorraine Dugoff, a University of Pennsylvania high-risk pregnancy specialist, wrote in an editorial in the journal that gene testing should become the standard of care when a structural problem is suggested by ultrasound. But its value may be incremental in other cases and offset by the 1.5 percent of cases where a gene abnormality of unknown significance is found.

In those cases, "a lot of couples might not be happy that they ordered that test" because it can't give a clear answer, she said.

Ana Zeletz, a former pediatric nurse from Hoboken, N.J., had one of those results during the study. An ultrasound suggested possible Down syndrome; gene testing ruled that out but showed an abnormality that could indicate kidney problems — or nothing.

"They give you this list of all the things that could possibly be wrong," Zeletz said. Her daughter, Jillian, now 2, had some urinary and kidney abnormalities that seem to have resolved, and has low muscle tone that caused her to start walking later than usual.

"I am very glad about it," she said of the testing, because she knows to watch her daughter for possible complications like gout. Without the testing, "we wouldn't know anything, we wouldn't know to watch for things that might come up," she said.

The other study involved 532 stillbirths — deaths of a fetus in the womb before delivery. Gene testing revealed the cause in 87 percent of cases versus 70 percent of cases analyzed by the visual chromosome inspection method. It also gave more information on specific genetic abnormalities that couples could use to estimate the odds that future pregnancies would bring those risks.

The study was led by Dr. Uma Reddy of the National Institute of Child Health and Human Development.

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Online:

Medical journal: http://www.nejm.org

___

Marilynn Marchione can be followed at http://twitter.com/MMarchioneAP

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Dow, S&P rise, but Nasdaq sours with Apple in wild day

NEW YORK (Reuters) - A volatile trading session ended with U.S. stocks mostly higher on Wednesday, even as Apple, the most valuable company in the United States, suffered its worst day of losses in almost four years.

In a strange occurrence, Apple accounted for the entirety of the Nasdaq 100's <.ndx> fall of 1.1 percent, while the Dow industrials - which do not include Apple as a component - enjoyed the best day since November 28.

With the drop, Apple shed nearly $35 billion in market capitalization, its biggest one-day market-cap loss ever. The company's market value, or market capitalization, now stands at $506.85 billion.

"Today's move is because of index weightings, with the Nasdaq down because of Apple's decline," said Rex Macey, chief investment officer of Wilmington Trust in Atlanta. "The S&P is up because Apple isn't as big a weight in that index, and the Dow is up even more because it isn't there at all."

The broad market seesawed, with the S&P 500 dropping into negative territory before it rebounded off the 1,400 level, seen as a key support point over the past two weeks. Investors cited comments from President Barack Obama suggesting a potential near-term resolution to the "fiscal cliff" wrangling in Washington as a catalyst for the rebound.

Shares of The Travelers Cos Inc rose 4.9 percent to $74. The stock ranked as the Dow's top percentage gainer after the insurance company said it intended to resume stock buybacks it had temporarily suspended while it assessed its exposure to Superstorm Sandy. The company also said a preliminary estimate of net losses from Sandy was about $650 million after tax.

The Dow Jones industrial average <.dji> rose 82.71 points, or 0.64 percent, to 13,034.49 at the close. The Standard & Poor's 500 Index <.spx> gained 2.23 points, or 0.16 percent, to 1,409.28. But the Nasdaq Composite Index <.ixic> fell 22.99 points, or 0.77 percent, to end at 2,973.70.

Apple, the largest U.S. company by market capitalization and a big weight in both the S&P 500 and the Nasdaq, fell 6.4 percent to $538.79. Apple is down more than 20 percent from an all-time high reached in late September, putting the stock into bear market territory.

Banking shares were led higher by a 6.3 percent jump in Citigroup to $36.46 after the company said it would cut 4 percent of its workforce. The S&P financial sector index <.gspf> climbed 1.3 percent, and Bank of America hit a 52-week high of $10.55 before pulling back slightly. The stock, a Dow component, ended at $10.46, up 5.7 percent for the day.

Cyclical sectors, which are tied to the pace of economic growth, rallied on optimism about progress on a solution to avoid the fiscal cliff. An S&P index of industrial stocks <.gspi> rose 1.1 percent, buoyed by Caterpillar Inc , up 2.2 percent at $86.05, while an S&P index of energy shares <.gspe> climbed 0.7 percent. The Dow Jones Transportation Average <.djt> gained 0.9 percent, with CSX Corp jumping 2.7 percent to $20.16.

Still, Apple struggled throughout the session. Market participants cited a host of reasons for the drop in the iPad maker's stock, including a consultant's report about the company losing share in the tablet market and reports that margin requirements had been raised by at least one clearing firm, as well as year-end tax selling ahead of a possible rise in capital-gains tax rates next year.

On the Washington front, Obama told the Business Roundtable, a group of chief executives, on Wednesday that a fiscal cliff deal was possible "in about a week" if Republicans acknowledged the need to raise taxes on the wealthiest Americans.

Equities have struggled to gain ground recently because of concerns over the fiscal cliff - a series of mandatory spending cuts and tax increases effective in early January that could push the U.S. economy into recession next year. Recently equities have moved on any whiffs of sentiment from Washington in headlines about negotiations.

"Obama's comments generated a lot of optimism, but to the extent the market believes them, that's how much we're setting ourselves up for a decline if that deadline passes with no progress," said Macey, who helps oversee about $20 billion in assets.

In an interview on CNBC after the market closed, U.S. Treasury Secretary Tim Geithner said that uncertainty over the fiscal cliff was standing in the way of stronger economic growth, and that there was no prospect for an agreement if tax rates didn't rise on the wealthiest taxpayers.

The stock of Freeport-McMoRan Copper & Gold Inc fell 16 percent to $32.17 and ranked as the S&P 500's biggest percentage decliner. The company said it was acquiring Plains Exploration & Production Co and McMoRan Exploration Co in two separate deals for $9 billion in cash and stock in a major expansion into energy.

McMoRan Exploration soared 87 percent to $15.82 and Plains surged 23.4 percent to $44.50.

About half of the stocks traded on the New York Stock Exchange closed in positive territory, while about 54 percent of Nasdaq-listed shares ended lower.

Volume was higher than it has been in recent sessions, with about 6.93 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, above the daily average so far this year of about 6.48 billion shares.

(Editing by Jan Paschal)

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Changing of the Guard: How Crash Cover-Up Altered China’s Succession

BEIJING — “Thank you. I’m well. Don’t worry,” read the post on a Chinese social networking site. The brief comment, published in June, appeared to come from Ling Gu, the 23-year-old son of a high-powered aide to China’s president, and it helped quash reports that he had been killed in a Ferrari crash after a night of partying.

It only later emerged that the message was a sham, posted by someone under Mr. Ling’s alias — almost three months after his death.

The ploy was one of many in a tangled effort to suppress news of the Ferrari crash that killed Mr. Ling and critically injured two young female passengers, one of whom later died. The outlines of the affair surfaced months ago, but it is now becoming clearer that the crash and the botched cover-up had more momentous consequences, altering the course of the Chinese Communist Party’s once-in-a-decade leadership succession last month.

China’s departing president, Hu Jintao, entered the summer in an apparently strong position after the disgrace of Bo Xilai, previously a rising member of a rival political network who was brought down when his wife was accused of murdering a British businessman. But Mr. Hu suffered a debilitating reversal of his own when party elders — led by his predecessor, Jiang Zemin — confronted him with allegations that Ling Jihua, his closest protégé and political fixer, had engineered the cover-up of his son’s death.

According to current and former officials, party elites, and others, the exposure helped tip the balance of difficult negotiations, hastening Mr. Hu’s decline; spurring the ascent of China’s new leader, Xi Jinping; and playing into the hands of Mr. Jiang, whose associates dominate the new seven-man leadership at the expense of candidates from Mr. Hu’s clique.

The case also shows how the profligate lifestyles of leaders’ relatives and friends can weigh heavily in backstage power tussles, especially as party skulduggery plays out under the intensifying glare of media.

Numerous party insiders provided information regarding the episode, speaking on the condition of anonymity for fear of reprisals from the authorities. Officials have investigated the aftermath of the car wreck, they say, including looking into accusations that a state oil company paid hush money to the families of the two women.

Under Mr. Hu, Mr. Ling had directed the leadership’s administrative center, the General Office, but was relegated to a less influential post in September, ahead of schedule. Last month, he failed to advance to the 25-person Politburo and lost his seat on the influential party secretariat.

Mr. Hu, who stepped down as party chief, immediately yielded his post as chairman of the military, meaning he will not retain power as Mr. Jiang did. “Hu was weakened even before leaving office,” said a midranking official in the Organization Department, the party’s personnel office.

Mr. Ling’s future remains unsettled, with party insiders saying that his case presents an early test of whether Mr. Xi intends to follow through on public promises to fight high-level corruption.

“He can decide whether to go after Ling Jihua or not,” said Wu Guoguang, a former top-level party speechwriter, now a political scientist at the University of Victoria in British Columbia. “Either way, this is a big card in Xi Jinping’s hand.”

Mr. Ling, 56, built his career in the Communist Youth League. At an early age, he secured the patronage of Mr. Hu, who led the Youth League in the early 1980s and brought Mr. Ling to the General Office in 1995. “Hu didn’t come with a lot of friends, but Ling was someone he knew he could trust,” said the Organization Department official. “Officials said that if Ling called, it was like Hu calling.”

Mr. Ling played a central role in moving Youth League veterans into high offices and undermining Mr. Hu’s adversaries. Mr. Ling also wielded leverage over Internet censorship of leaders’ affairs, and sought to use it to benefit his patron.

“Negative publicity, including untruths, about Xi Jinping were not suppressed the way publicity about Hu Jintao was,” said one associate of party leaders.

As his influence grew, Mr. Ling tried to keep a low profile. About a decade ago, his wife closed a software company she owned and formed a nonprofit foundation that incubates young entrepreneurs. The couple sent their son, Ling Gu, to an elite Beijing high school under an alias, Wang Ziyun. “Ling Jihua told his family not to damage his career,” a former Youth League colleague said. “But it seems it can’t be stopped.”

Still living under an alias, Ling Gu graduated from Peking University last year with an international relations degree and began graduate studies in education. One of his instructors said his performance plunged later in his undergraduate years. “I think there were too many lures, too much seduction,” he said.

Before dawn on March 18, a black Ferrari Spider speeding along Fourth Ring Road in Beijing ricocheted off a wall, struck a railing and cracked in two. Mr. Ling was killed instantly, and the two young Tibetan women with him were hospitalized with severe injuries. One died months later, and the other is recovering, party insiders said.

Ian Johnson and Edward Wong contributed reporting.

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HTC, Apple ordered to show which patents were included in their settlement agreement

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The Voice Reveals Top Four Contestants

TV Watch

By Julia Haskins

12/04/2012 at 09:35 PM EST

The Voice"'s top six contestants were under double pressure Monday night when they had to sing two songs each. But there was even more stress at Tuesday's elimination.

"It went as well as it could have gone," Team Blake's Terry McDermott said on Monday of his performances of "I Want to Know What Love Is" and Rod Stewart's "Stay with Me." "There was a lot of pressure stripping a song down, but it worked to my advantage."

"I felt good," said Team Cee Lo's Trevin Hunte, who performed "Walking on Sunshine" and Jennifer Hudson's "And I Am Telling You (I'm Not Going)." "I'm confident. I feel like I've really grown. I'm definitely happy with my performance. I just want to see how America votes."

His chance came Tuesday when he and McDermott stood alongside competitors Nicholas David (Team Cee Lo), Cassadee Pope (Team Blake), Melanie Martinez and Amanda Brown (both Team Adam) to hear host Carson Daly reveal the voting results. Keep reading to find out ...

America saved McDermott, Hunte and Pope, but Martinez said goodbye to the competition for good. "I love all of you who have supported me," she said to her fans. "I'm just so grateful for you."

Brown also met the same fate, making David the final member of the top four.

The semi-final show airs Monday at 8:00 p.m. on NBC.

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Study: Drug coverage to vary under health law

WASHINGTON (AP) — A new study says basic prescription drug coverage could vary dramatically from state to state under President Barack Obama's health care overhaul.

That's because states get to set benefits for private health plans that will be offered starting in 2014 through new insurance exchanges.

The study out Tuesday from the market analysis firm Avalere Health found that some states will require coverage of virtually all FDA-approved drugs, while others will only require coverage of about half of medications.

Consumers will still have access to essential medications, but some may not have as much choice.

Connecticut, Virginia and Arizona will be among the states with the most generous coverage, while California, Minnesota and North Carolina will be among states with the most limited.

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Online:

Avalere Health: http://tinyurl.com/d3b3hfv

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Wall Street slips as investors seek cliff progress

NEW YORK (Reuters) - Stocks finished slightly lower in a quiet session on Tuesday as the back-and-forth wrangling over the "fiscal cliff" gave investors little reason to act.

Trading volume was light as legislators continue to negotiate a deal to avoid a $600 billion package of tax hikes and federal spending cuts that would begin January 1 and could push the economy into recession.

Just 5.86 billion shares changed hands on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the year's daily average of 6.48 billion shares.

A key measure of investor anxiety has remained muted. The CBOE Volatility Index or VIX <.vix>, a gauge of market anxiety, was at 17.12, up 2.9 percent. It has not traded above 20 since July.

Optimism for progress was dented after remarks by President Barack Obama, who rejected a Republican proposal to resolve the crisis as "out of balance" and said any deal must include a rise in income tax rates on the wealthiest Americans.

"People don't know if what's going on is political posturing or real negotiations that represent progress," said Bernard Baumohl, managing director and chief global economist at the Economic Outlook Group in Princeton, New Jersey.

Expectations of higher taxes on dividends beginning in 2013 have pushed many companies to pay special dividends this year or advance their next payback to investors. Coach became the latest to move up the date of its next dividend payment, and the news lifted shares of the upscale leather-goods maker earlier in the session. By the close, though, Coach was down 1.2 percent at $57.52.

One of the S&P 500's top sectors for the day was health care <.gspa>, considered a defensive group.

The Dow Jones industrial average <.dji> fell 13.82 points, or 0.11 percent, to 12,951.78 at the close. The Standard & Poor's 500 Index <.spx> dipped 2.41 points, or 0.17 percent, to 1,407.05. The Nasdaq Composite Index <.ixic> shed 5.51 points, or 0.18 percent, to close at 2,996.69.

The market has been sensitive to rhetoric from Washington, as a failure to reach an agreement could send the U.S. economy back into recession. Still, many expect a resolution to be found, which could extend the S&P 500's rally of 12 percent so far this year.

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

Congressional Republicans recently proposed steep spending cuts to bring down the budget deficit, but gave no ground on Obama's call to raise tax rates on the rich. The proposal was quickly dismissed by the White House.

"We're on hold trying to figure it out, but investors are stressed since they have to make decisions soon about how to proceed with their investments if taxes are indeed going up. We could see a real pick-up in volume over the next week or so," Baumohl said.

Netflix Inc was the S&P 500's top percentage gainer, advancing 14 percent to $86.65 after Walt Disney Co agreed to give the company exclusive TV distribution rights to its movies, starting in 2016.

Intel Corp shares rose 2.2 percent to $19.97 after the top chipmaker sold $6 billion in bonds to fund stock buybacks and other business activities.

Darden Restaurants Inc shares plunged 9.6 percent to $47.40 as the S&P 500's worst performer after the company warned that 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 surged 11.5 percent to $31.27 after the close-out retailer posted a smaller-than-expected loss and boosted its full-year adjusted earnings forecast.

MetroPCS Communications shares tumbled 7.5 percent to $9.96 after Sprint Nextel appeared unlikely to make a counter-offer for the wireless service provider.

Almost half of the stocks traded on the New York Stock Exchange closed lower, while 50 percent of Nasdaq-listed shares closed in negative territory.

After the closing bell, Pandora Media Inc

shares plunged 23 percent after the company reported its third-quarter results.

(Editing by Jan Paschal)

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