Koop, who transformed surgeon general post, dies


With his striking beard and starched uniform, former Surgeon General Dr. C. Everett Koop became one of the most recognizable figures of the Reagan era — and one of the most unexpectedly enduring.


His nomination in 1981 met a wall of opposition from women's groups and liberal politicians, who complained President Ronald Reagan selected Koop, a pediatric surgeon and evangelical Christian from Philadelphia, only because of his conservative views, especially his staunch opposition to abortion.


Soon, though, he was a hero to AIDS activists, who chanted "Koop, Koop" at his appearances but booed other officials. And when he left his post in 1989, he left behind a landscape where AIDS was a top research and educational priority, smoking was considered a public health hazard, and access to abortion remained largely intact.


Koop, who turned his once-obscure post into a bully pulpit for seven years during the Reagan and George H.W. Bush administrations and who surprised both ends of the political spectrum by setting aside his conservative personal views on issues such as homosexuality and abortion to keep his focus sharply medical, died Monday at his home in Hanover, N.H. He was 96.


An assistant at Koop's Dartmouth College institute, Susan Wills, confirmed his death but didn't disclose its cause.


Dr. Richard Carmona, who served as surgeon general a decade ago under President George W. Bush, said Koop was a mentor to him and preached the importance of staying true to the science even if it made politicians uncomfortable.


"He set the bar high for all who followed in his footsteps," Carmona said.


Although the surgeon general has no real authority to set government policy, Koop described himself as "the health conscience of the country" and said modestly just before leaving his post that "my only influence was through moral suasion."


A former pipe smoker, Koop carried out a crusade to end smoking in the United States; his goal had been to do so by 2000. He said cigarettes were as addictive as heroin and cocaine. And he shocked his conservative supporters when he endorsed condoms and sex education to stop the spread of AIDS.


Chris Collins, a vice president of amFAR, the Foundation for AIDS Research, said many people don't realize what an important role Koop played in the beginning of the AIDS epidemic.


"At the time, he really changed the national conversation, and he showed real courage in pursuing the duties of his job," Collins said.


Even after leaving office, Koop continued to promote public health causes, from preventing childhood accidents to better training for doctors.


"I will use the written word, the spoken word and whatever I can in the electronic media to deliver health messages to this country as long as people will listen," he promised.


In 1996, he rapped Republican presidential hopeful Bob Dole for suggesting that tobacco was not invariably addictive, saying Dole's comments "either exposed his abysmal lack of knowledge of nicotine addiction or his blind support of the tobacco industry."


Although Koop eventually won wide respect with his blend of old-fashioned values, pragmatism and empathy, his nomination met staunch opposition.


Foes noted that Koop traveled the country in 1979 and 1980 giving speeches that predicted a progression "from liberalized abortion to infanticide to passive euthanasia to active euthanasia, indeed to the very beginnings of the political climate that led to Auschwitz, Dachau and Belsen."


But Koop, a devout Presbyterian, was confirmed after he told a Senate panel he would not use the surgeon general's post to promote his religious ideology. He kept his word.


In 1986, he issued a frank report on AIDS, urging the use of condoms for "safe sex" and advocating sex education as early as third grade.


He also maneuvered around uncooperative Reagan administration officials in 1988 to send an educational AIDS pamphlet to more than 100 million U.S. households, the largest public health mailing ever.


Koop personally opposed homosexuality and believed sex should be saved for marriage. But he insisted that Americans, especially young people, must not die because they were deprived of explicit information about how HIV was transmitted.


Koop further angered conservatives by refusing to issue a report requested by the Reagan White House, saying he could not find enough scientific evidence to determine whether abortion has harmful psychological effects on women.


Koop maintained his personal opposition to abortion, however. After he left office, he told medical students it violated their Hippocratic oath. In 2009, he wrote to Senate Majority Leader Harry Reid, urging that health care legislation include a provision to ensure doctors and medical students would not be forced to perform abortions. The letter briefly set off a security scare because it was hand delivered.


Koop served as chairman of the National Safe Kids Campaign and as an adviser to President Bill Clinton's health care reform plan.


At a congressional hearing in 2007, Koop spoke about political pressure on the surgeon general post. He said Reagan was pressed to fire him every day, but Reagan would not interfere.


Koop, worried that medicine had lost old-fashioned caring and personal relationships between doctors and patients, opened his institute at Dartmouth to teach medical students basic values and ethics. He also was a part-owner of a short-lived venture, drkoop.com, to provide consumer health care information via the Internet.


Koop was born in the New York City borough of Brooklyn, the only son of a Manhattan banker and the nephew of a doctor. He said by age 5 he knew he wanted to be a surgeon and at age 13 he practiced his skills on neighborhood cats.


He attended Dartmouth, where he received the nickname Chick, short for "chicken Koop." It stuck for life.


Koop received his medical degree at Cornell Medical College, choosing pediatric surgery because so few surgeons practiced it.


In 1938, he married Elizabeth Flanagan, the daughter of a Connecticut doctor. They had four children, one of whom died in a mountain climbing accident when he was 20.


Koop was appointed surgeon-in-chief at Children's Hospital in Philadelphia and served as a professor at the University of Pennsylvania School of Medicine.


He pioneered surgery on newborns and successfully separated three sets of conjoined twins. He won national acclaim by reconstructing the chest of a baby born with the heart outside the body.


Although raised as a Baptist, he was drawn to a Presbyterian church near the hospital, where he developed an abiding faith. He began praying at the bedside of his young patients — ignoring the snickers of some of his colleagues.


Koop's wife died in 2007, and he married Cora Hogue in 2010.


He was by far the best-known surgeon general and for decades afterward was still a recognized personality.


"I was walking down the street with him one time" about five years ago, recalled Dr. George Wohlreich, director of the College of Physicians of Philadelphia, a medical society with which Koop had longstanding ties. "People were yelling out, 'There goes Dr. Koop!' You'd have thought he was a rock star."


___


Ring reported from Montpelier, Vt. Cass reported from Washington. AP Medical Writers Lauran Neergaard in Washington and Mike Stobbe in New York contributed to this report.


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Asian shares slip, EU bourses set to slide on Italy vote

TOKYO (Reuters) - Asian shares declined on Tuesday and the euro hit its lowest in nearly seven weeks against the dollar as an apparently deadlocked election in Italy raised the specter of a resurgent euro zone debt crisis.


Italy's main FTSE MIB <.ftmib>stock market index is expected to open down 2.5 percent, while other European markets are also seen slumping with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> would open down as much as 2.6 percent. U.S. stock futures were flat to suggest a cautious Wall Street start. <.l><.eu><.n/>


"There's a possibility that the Italians might be heading back to the polls. In the short term, investors and traders don't like the uncertainty," said Ben Le Brun, market analyst at OptionsXpress in Sydney.


Italy's centre-left coalition will win a majority in the lower house of parliament but the upper house will be deadlocked, the Interior Ministry said on Tuesday after almost all votes were counted. No party or coalition won a majority of seats in the Senate, which a government would need to pass legislation.


A split parliament in the euro zone's third-largest economy is seen as likely to paralyze any new government and potentially reignite the euro-zone debt crisis.


"Financial markets will now have to take at face value the idea that the protest vote can actually attain an overall majority in some parts of Europe's legislatures. This is indeed a worrying development and one that should rattle financial markets for some time to come," Westpac said in a note.


The yen and the euro stabilized and Asia's overall equities losses were less severe than U.S. benchmark Standard & Poor's 500 Index <.spx> which suffered its worst one-day percentage decline since November 7 with a 1.8 percent tumble on Monday.


The MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> skidded 0.9 percent. Australian shares <.axjo> slipped 1 percent, South Korean shares <.ks11> eased 0.4 percent while Hong Kong <.hsi> shed 0.8 percent to test a new 2012 low. Shanghai shares <.ssec> outperformed Asian peers after official media dispelled monetary tightening fears.


Southeast Asian shares, which have hit record highs recently, posted a larger drop, with the Philippines <.psi> plunging 1.2 percent after a record finish on Monday and Indonesian stocks tumbling 0.9 percent after also closing at a record on Monday.


U.S. crude slid 0.8 percent to $92.34 a barrel and Brent fell 0.7 percent to $113.61.


Spot gold inched down 0.2 percent to $1,591.01 an ounce, but London copper edged up 0.3 percent to $7,862 a metric ton.


"Volatile overnight markets discouraged those who had not been able to buy at the dips, while a lack of clear direction as well as growing risks have also reduced incentives for investors to venture out into the markets," said Tetsu Emori, a commodities fund manager at Astmax Investments in Tokyo.


YEN FIRMING HALTS


The yen resumed its retreat after firming sharply on Monday when nervousness about Italy exposed the yen to sharp reversals from its recent steep losses on bets of aggressive reflationary monetary policy in Japan.


The yen traded down 0.2 percent against the dollar at 91.93 after gaining 2 percent to 90.85 on Monday from its intraday low of 94.77 touched earlier in the day, its lowest since May 2010. The yen was also down 0.3 percent against the euro to 119.99 after jumping more than 3 percent to 118.74 on Monday from its day's low of 125.36.


The yen's overnight appreciation hit Japan's Nikkei stock average, with the index <.n225> tumbling 2.3 percent after closing at a 53-month high the day before. <.t/>


Traders said the plunge in the dollar and the euro against the Japanese currency has provided fresh opportunities to buy these currencies against the yen, with many market players still seeing a weak yen trend continuing.


But the euro fell to its lowest in nearly seven weeks at $1.3042 on jitters that political gridlock in Italy will hamper the country's efforts to reform and slash its debts.


"Uncertainty over the Italian election outcome and its impact will certainty keep the euro under strong pressure for some time," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.


"A safety net has been provided over the past year in the euro zone and given the size of Italy's economy, I doubt that the situation will turn into a disaster, but we need to carefully monitor developments. It revives memories of risks in the euro zone," Saito added.


The focus will now be on an Italian treasury bill auction on Tuesday when borrowing costs could rise, given the Senate election result.


Investors also await testimony later in the day from Federal Reserve Chairman Ben Bernanke for further clues to when the Fed intends to slow down or stop its bond-buying program.


Financial markets were rattled last week by minutes of the Fed's January meeting showing some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected.


Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said on Monday that U.S. economic growth could surpass expectations this year, but an anemic labor market requires ongoing support from monetary policy.


The United States also faces downside risks to its economy if $85 billion in government-wide "sequestration" spending cuts go ahead on March 1.


(Additional reporting by Manolo SerapiThuy Ong in Sydney; Editing by Eric Meijer)



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South Korea’s Park Geun-hye Warns North Against Nuclear Pursuits





SEOUL, South Korea — Park Geun-hye, the daughter of a late military strongman, was sworn in Monday as South Korea’s first female president, warning North Korea that the primary victim of its pursuit of nuclear weapons and long-range missiles will be the isolated country itself.




“North Korea’s recent nuclear test is a challenge to the survival and future of the Korean people, and there should be no mistake that the biggest victim will be none other than North Korea itself,” Ms. Park said in her inaugural address in front of the National Assembly building in Seoul.


She urged North Korea to abandon its nuclear ambitions without delay, “instead of wasting its resources on nuclear and missile development and continuing to turn its back to the world in self-imposed isolation.”


Her motorcade’s arrival Monday at the presidential Blue House marked a triumphant moment not just for Ms. Park but for her family. Ms. Park, 61, was returning to her childhood home, 34 years after the assassination of her father, Park Chung-hee, a divisive figure even now. Mr. Park’s 18-year rule was credited with rapidly raising South Korea’s economy from postwar devastation, but his iron-fisted governance was increasingly maligned as the country evolved toward democracy.


Ms. Park was elected in December thanks largely to the support of South Koreans in their 50s and older. Many younger voters were vehemently opposed to her candidacy, saying she represented a return to the past.


North Korea, meanwhile, has again become a prime national security concern. A week before Ms. Park’s election, the North launched a satellite into orbit in defiance of United Nations resolutions. On Feb. 12, it conducted a third nuclear test. The two events have heightened fears that years of efforts by Washington and its allies to rein in the North’s nuclear ambitions have failed, even as Pyongyang appears to have made progress toward achieving the capability to make long-range nuclear missiles.


Speaking Monday before a large crowd — which earlier had been entertained by the rapper Psy, famous for the song “Gangnam Style” — Ms. Park also addressed economic concerns, a major issue in the election. She said her tasks as president would include “achieving economic rejuvenation, the happiness of the people and the flourishing of our culture.”


In a comment reminiscent of her father, she called for a “second miracle on the Han River.” Seoul, which straddles the Han, began transforming itself into an industrialized metropolis under her father, who sought economic growth at all costs and nurtured a handful of family-controlled companies, such as Samsung and Hyundai, as the engines of an export-driven economy.


Now, as his daughter takes office, one of the biggest complaints among ordinary South Koreans is of widening economic inequality, particularly those conglomerates’ overpowering influence on smaller businesses — a grievance Mr. Park addressed in her speech, saying that a second Han River “miracle” should be based on “economic democratization.”


She promised policies designed to strengthen small and medium-sized enterprises so that “such businesses can prosper alongside large companies.” She said, “By rooting out various unfair practices and rectifying the misguided habits of the past which have frustrated small business owners and small and medium-sized enterprises, we will provide active support to ensure that everyone can live up to their fullest potential, regardless of where they work or what they do for a living.”


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Les Misérables Stars Oscar Gowns: Love 'Em or Leave 'Em







Style News Now





02/24/2013 at 09:30 PM ET











Oscars 2013 Anne Hathaway Amanda Seyfried GownsJason Merritt/Getty, John Shearer/AP


Though Anne Hathaway and Amanda Seyfried got a thumbs-up from the PEOPLE StyleWatch team for their bubbly red carpet demeanors and terrific hair and makeup, their dresses inspired decidedly mixed reactions.


Hathaway said she picked her baby pink Prada column just hours before the ceremony. The dress had a fun, criss-crossed back and the Tiffany & Co. diamonds she draped herself with were spectacular, but the bodice of the dress was, er, possibly not safe for work when seen up close on the red carpet.


Seyfried’s lilac Alexander McQueen gown with silver leaf embroidery was a sophisticated pick (and a challenging one: she mentioned that the corset was “pushing her organs out of her body”) but the fit wasn’t exact — and if you’re reading, Amanda, we’d really love to see you in more color.


RELATED PHOTOS: The Best Dressed List


Since we’re ambivalent about these dresses, we want you to vote in the polls below, and tell us: What do you think of Hathaway and Seyfried’s Oscar gowns? If you don’t like them, what would you want to see them wear?










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Car Bomb Hits Intelligence Agency in Afghanistan







KABUL, Afghanistan (AP) — A series of early morning attacks hit eastern Afghanistan Sunday, with three separate suicide bombings in outlying provinces and a shootout between security forces and a would-be attacker in the capital city of Kabul.




The deadliest attack was a suicide car bombing at a state intelligence site just after sunrise in the eastern city of Jalalabad. In that attack, a car approached the gate of a compound used by the National Directorate of Security and exploded, killing two guards and wounding three others, said regional government spokesman Ahmad Zia Abdulzai. The building was damaged in the attack, he added.


Taliban spokesman Zabiullah Mujahid claimed responsibility for the bombing.


Shortly before the Jalalabad attack, an assailant detonated a van packed with explosives at a highway police checkpoint in Logar province, also in the east. That explosion wounded three police officers but no one was killed, said Deputy Police Chief Rais Khan Abdul Rahimzai.


In Kabul, meanwhile, police shot and killed a would-be suicide bomber who was trying to attack an intelligence agency office downtown, according to the city's deputy police chief, Gen. Mohammad Daud Amin. Intelligence agents spotted the bomber before he could detonate the explosives in his vehicle and shot him, Amin said.


The explosives in the vehicle were later defused, he added.


Later in the morning, a man wearing a suicide vest blew himself up outside the police headquarters for Baraki Barak district in Logar province. The man was stopped by police as he tried to force his way into the building, but still managed to detonate his vest, said Din Mohammad Darwesh, the provincial government spokesman.


One policeman was wounded in the Baraki Barak attack, Darwesh said.


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Breaking Dawn - Part 2 Sweeps the Razzies









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.

Breaking Dawn – Part 2 Sweeps the Razzies| Oscars 2013, The Razzies 2013, Movies, Battleship, That's My Boy, News Franchises, Individual Class, Adam Sandler, Kristen Stewart, Rihanna, Robert Pattinson

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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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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Chinese City Reports Second Bird Flu Fatality





HONG KONG — China has reported a second fatality from the deadly H5N1 bird flu, a 31-year-old man who died of organ failure in the south-central Chinese city of Guiyang.




The flu, which is circulated in poultry and birds, has infected only 600 humans in the last decade, but has proven fatal in half the cases, so public health officials closely monitor its transmission. Scientists fear that the flu could mutate into a form that is highly contagious in humans.


In the most recent case, the man died Friday at a hospital in Guiyang. That city is also where a 21-year old woman died on Feb. 13. The official Xinhua news agency said that both victims had been in close contact with birds, the most common means of transmission.


The news agency added that 110 people who had been exposed to the victims had been released from quarantine.


As of Feb. 15, there have been 10 cases of H5N1 reported worldwide since the start of the year, according to the World Health Organization. In all of 2012, there were 32 cases worldwide.


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Courtney Lopez: Gia Thinks Our Dog Is Having a Baby




Celebrity Baby Blog





02/22/2013 at 01:00 PM ET



Courtney Lopez: Gia Thinks Dog Having Baby
Denise Truscello/Wireimage


Mario Lopez is a man of his word.


Following a December wedding, the EXTRA host declared he and wife Courtney would get to work expanding their family immediately — and he wasn’t kidding.


In January, the couple discovered they were indeed expecting.


“Mario and I are so excited to add to our family! I found out a month ago and surprised Mario with the good news at breakfast,” Courtney tells PEOPLE.


But the proud parents aren’t the only ones gearing up for a new addition. Big sister Gia Francesca, 2, already has babies on the brain.


“Gia kind of understands that there is a baby in my belly,” Courtney notes. “She also told me our dog Julio has a baby in his belly — so who knows!”

Despite a bumpy start — “I had a rough couple of weeks when I first found out,” she shares — the mom-to-be is feeling better and already sporting quite the blossoming belly. “I am showing so much faster this time around,” she says.


And with warmer weather on the way, Courtney will be swathing her bump in floor-length frocks — but plans on forgoing a few fashion ensembles from her past.


“I love being pregnant in the summer! I live in maxi dresses,” she says. “Looking back at my first pregnancy, there are certain things that I wore and I have no idea why. I looked horrible and I won’t do that again!”


Originally from Pittsburgh, the expectant mama is thrilled to have settled down with her growing family on the West Coast. Her only wish? That her children will one day enjoy a winter wonderland.


“I don’t miss the East Coast at all — especially the humidity,” she explains. “The one thing I do want my children to experience from an early age is snow. There is nothing like being a kid playing in the snow.”


– Anya Leon


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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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