Wall Street falls as "cliff" talks sour, but hopes remain

NEW YORK (Reuters) - U.S. stocks sold off late in the day to close at session lows on Wednesday as talks to avert a year-end fiscal crisis turned sour, even as investors still expect a deal.


The S&P 500 slipped after a two-day rally that took the benchmark index to its highest close in two months. Defensive-oriented shares led the decliners, including health care and consumer staples.


General Motors bucked the overall weakness to surge 6.6 percent to $27.18 after the automaker said it will buy back 200 million of its shares from the U.S. Treasury, which plans to sell the rest of its GM stake over the next 15 months.


President Barack Obama and congressional Republicans are struggling to come up with a deal to avoid early 2013 tax hikes and spending cuts that many economists say could send the U.S. economy into recession.


House Speaker John Boehner, the top Republican in Congress, said in a one-minute press conference that his chamber will pass a proposal that Obama had already threatened to veto as it spares many wealthy Americans from tax hikes needed to balance the budget. Obama has already agreed to reductions in benefits for senior citizens.


"My guess is they're close to a deal, and right before, it looks like the deal is about to blow up either on manufactured or legitimate reasons," said Uri Landesman, president of hedge fund Platinum Partners in New York.


He said if the market thought a deal was in real danger, the S&P 500 would slide below 1,400. It stands now near 1,435, not far from a two-month high.


The CBOE Volatility Index <.vix> surged 11.5 percent to 17.36, but has remained relatively stable. Its 14- 50- and 200-day averages are all within 1.1 points.


Landesman said the VIX's stability indicates "the bulls have control of this market still."


Banks and energy shares - groups that outperform during periods of economic expansion - have led recent gains, indicating a shift to focusing on a growing economy as Wall Street looks past the budget talks.


Defensive sectors led Wednesday's downturn, with the S&P health care sector index <.gspa> down 1.1 percent.


The Dow Jones industrial average <.dji> dropped 98.99 points, or 0.74 percent, to 13,251.97. The S&P 500 <.spx> lost 10.98 points, or 0.76 percent, to 1,435.81. The Nasdaq Composite <.ixic> fell 10.17 points, or 0.33 percent, to 3,044.36.


Herbalife Ltd shares tumbled 12.1 percent to $37.34 after William Ackman, one of the world's biggest hedge fund managers, said he is shorting the stock of the weight management products company.


Oracle shares helped cap the Nasdaq's loss after the company reported earnings that beat expectations on strong software sales growth. Oracle jumped 3.7 percent to $34.09.


Knight Capital Group Inc climbed 5.4 percent to $3.51 after it agreed to be bought by Getco Holdings in a deal valued at $1.4 billion. The stock, which nearly collapsed after a trading error in August, remains down about 70 percent so far this year.


Shares of Chinese display advertising provider Focus Media Holding Ltd jumped 6.7 percent to $25.52 after it agreed to be bought by a consortium of private equity funds led by the Carlyle Group for about $3.6 billion.


Data showed homebuilding permits touched their highest level in nearly 4-1/2 years in November. The PHLX housing index <.hgx> fell 0.8 percent, but has gained 66.4 percent this year as the housing market has turned the corner.


About 6.9 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly above the daily average so far this year of about 6.45 billion shares.


Advancing and declining issues were almost even on both the NYSE and the Nasdaq.


(Reporting by Rodrigo Campos; Editing by Jan Paschal)



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Iraq’s President, Jalal Talabani, Hospitalized After Stroke





BAGHDAD — Jalal Talabani, the president of Iraq, whose influence in mediating disputes among the country’s many political factions has far outweighed the limited powers of the office he occupies, suffered a stroke and was in grave health on Tuesday in a Baghdad hospital.







Scott Nelson/WpN for The New York Times

President Jilal Talabani of Iraq, pictured in May 2006, has been receiving medical treatment abroad in recent years.







Mr. Talabani’s illness cast a shadow over the Kurdish lands in the north where he once fought a guerrilla war and where he now lives, and added a new element of uncertainty to the country’s divided politics a year after the departure of the American military left Iraq’s leaders to steer the country’s shaky democracy on their own.


Officials and doctors said Mr. Talabani, 79, who has been treated abroad for medical conditions in recent years, was in stable condition, but privately other officials suggested his condition was more serious. A hospital official, as well as a high-level government official — both of whom requested anonymity out of respect for Mr. Talabani’s family — said the president was in a coma.


The deteriorating health of Mr. Talabani, a Kurd, comes at a time of heightened political tensions between Iraq’s central government and the semiautonomous Kurdish region. A dispute over land and oil that has festered for years has turned more serious in recent weeks as government forces have sought to take more control of security in disputed territories near Kirkuk, a northern city claimed by both the Kurds and the central government.


Mr. Talabani exerts sway over Iraq’s national affairs beyond the limited powers of his office, which is largely ceremonial. He is seen as a unifying figure with the power, at times, to bring Iraq’s many factions to the bargaining table, among the few national leaders, and perhaps the only one, with that status. His absence from politics would have a profound influence in Baghdad, where Mr. Talabani has been trying to mediate a continuing political crisis that at its core is a contest for power among the country’s three main groups: Shiites, Sunnis and Kurds.


At a brief news conference on Tuesday at the hospital where the president was being treated, a doctor described Mr. Talabani’s condition as “stable” and said he expected it to improve. On Twitter, Mr. Talabani’s son, Qubad Talabani, who represents the Kurdistan Regional Government in Washington, wrote that his father “is currently stable” and “we hope can begin his recovery soon.”


On Monday, Mr. Talabani met with Prime Minister Nuri Kamal al-Maliki to discuss Iraq’s political problems. Afterward, a statement from Mr. Talabani’s office said, the two men stressed the need for calm and transparent dialogue, as well as “working according to the spirit of the Constitution and the national agreements” as the way to solve the country’s ills.


Mr. Maliki has visited Mr. Talabani in the hospital, according to officials.


Mr. Talabani was apparently rushed to the hospital on Monday evening, although no announcement was made until Tuesday morning.


He is being treated by specialists at a hospital known as the Baghdad Medical City. Officials said doctors were trying to determine whether Mr. Talabani could be flown abroad for care. If not, foreign medical specialists were expected to fly to Baghdad to join the team treating him.


Christine Hauser contributed reporting from New York.



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Nielsen to buy Arbitron for about $1.26B






NEW YORK (AP) — Nielsen, the dominant source of TV ratings, on Tuesday said it had agreed to buy Arbitron for about $ 1.26 billion to expand into radio measurement.


Arbitron pays 70,000 people to carry around gadgets that register what stations they’re listening to. Since Nielsen also collects cash register data, CEO David Calhoun said buying Arbitron will let Nielsen be a one-stop shop for advertisers who want to know how the radio advertising they buy affects product sales.






The acquisition will let Nielsen expand the amount of media consumption it tracks by about 2 hours per person per day to 7 hours, Calhoun said in an interview.


“You don’t find many mediums that allow for that kind of increase,” Calhoun said.


Arbitron’s operations are mainly in the U.S., while Nielsen operates globally. Calhoun said another major driver for the deal is that Nielsen wants to spread Arbitron’s tracking technology to other countries.


Evercore Partners analyst Douglas Arthur said Nielsen doesn’t need traditional radio measurement to grow, but Arbitron seemed like a willing seller, and it will be a “nice complementary but not ‘must have’ platform.”


Nielsen Holdings N.V. said it will pay $ 48 per share, which is a 26 percent premium to Arbitron’s Monday closing price of $ 38.04. Shares of Arbitron, which is based in Columbia, Md., jumped $ 8.99, or 23.6 percent, to close at $ 47.03.


Nielsen, which went public in January 2011, has headquarters in the Netherlands and New York. Its stock added $ 1.30, or 4.4 percent, to close at $ 30.92.


Nielsen said it expects the deal to add about 13 cents per share to its adjusted earnings a year after closing and about 19 cents per share to adjusted earnings two years after closing.


Abitron’s chief operating officer, Sean Creamer, is set to take over as CEO from William Kerr on Jan. 1. Calhoun said he hoped Creamer would remain with Nielsen after the deal closes.


Nielsen said it has a financing commitment for the transaction.


Nielsen was the prime source of audience ratings in the early days of radio, thanks to a device similar to Arbitron’s People Meter. The Audimeter was attached to the radio set. The company’s focus shifted to TV measurement in the 1950s.


On Monday, Nielsen announced a deal with Twitter to measure how much U.S. TV watchers tweet about the shows they’re watching. The “Nielsen Twitter TV Rating” will debut in the fall.


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Kristen Stewart Apologizes for Making Everyone 'So Angry'















12/18/2012 at 06:30 PM EST







Kristen Stewart


Lorenzo Bevilaqua/Disney/Getty


Kristen Stewart is once again saying she's sorry.

A few months after publicly expressing regret over cheating on boyfriend Robert Pattinson with her Snow White and the Huntsman director Rupert Sanders, the actress has some words for everybody else.

"I apologize to everyone for making them so angry," the typically press-shy On the Road star, 22, tells Newsweek. "It was not my intention."

Stewart, who has been the subject of both vitriolic criticism and tremendous support from fans, adds, "It's not a terrible thing if you're either loved or hated."

But at the end of the day, the former Twilight star is primarily focused on her craft.

"I don't care [about people's opinions]," she explains. "It doesn't keep me from doing my s–––."

Addressing her most famous role, that of Bella Swan in the Twilight franchise, she says, "The only relief when it comes to Twilight is that the story is done ... I start every project to finish the mother––, and to extend that [mentality] over a five-year period adapting all of these treasured moments over four books, it was constantly worrying."

As for always being know to a generation of moviegoers as Bella, she says, "As long as people's perspective of me doesn't keep me from doing what I want to do, it doesn’t matter.”

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Shares, euro rise on hopes of U.S. "cliff" deal, BOJ easing

SINGAPORE (Reuters) - Asian shares rose and the euro hit multi-month highs on Wednesday as signs of progress in resolving the U.S. "fiscal cliff" budget crisis and expectations of more aggressive monetary stimulus from the Bank of Japan lifted riskier assets.


The gains in Asia came after Wall Street's S&P 500 <.spx> rose more than 1 percent, completing its best two-day run in a month, on growing confidence a deal can be reached in Washington to avoid a raft of painful spending cuts and tax rises due to take effect from January if there is no budget agreement. <.n/>


"What is important, and what is driving the market higher, is that the two parties are now in constructive discussions over specific tax levels and spending programs, and working towards a common middle ground," said Cameron Peacock, a strategist at IG Markets in Melbourne.


Industrial commodities such as oil and copper consolidated earlier gains, while gold recovered some lost ground but remained not far above its lowest in nearly four months as progress in the U.S. budget talks limited its safe-haven appeal.


JAPAN SHARES KEEP RISING


Tokyo's Nikkei share average <.n225> rose 1.3 percent, topping 10,000 points for the first time since April, as the Bank of Japan (BOJ) was starting a two-day policy meeting. <.t/>


The BOJ will ease monetary policy and consider adopting a 2 percent inflation target in January, double its current price goal, sources say, after pressure from the incoming prime minister, Shinzo Abe, for stronger efforts to beat deflation.


"The market is already in overbought territory, but investors are increasingly being alarmed that there is a risk of not having Japanese stocks in their portfolios," said Hiroichi Nishi, general manager at SMBC Nikko Securities.


Australian shares <.axjo> rose to a 17-month high, led by miners and banks. MSCI's broadest index of Asia Pacific shares outside Japan <.miapj0000pus> gained 0.3 percent, while S&P 500 futures were flat.


The euro rose as far as $1.3250 on electronic trading platform EBS, its highest since the beginning of May, and against the yen it fetched 111.58, having risen as far as 111.69, its highest since late August 2011.


"Unless U.S. fiscal cliff talks take an unexpected turn for the worse, we believe that EUR/USD will meet our 1.3300 year-end target," analysts at BNP Paribas wrote in a note.


Oil held steady, with Brent crude rising a few cents to around $108.88 a barrel and U.S. crude barely changed just below $88.


"There is more upside potential for Brent because of a revival in the overall economic outlook," said Yusuke Seta, a commodities sales manager at Newedge Japan.


Copper was also flat just above $8,020 a metric ton (1.1023 tons). Copper rallied almost 8 percent from mid-November to hit a two-month high a week ago, but has since lost some ground.


Gold rose 0.3 percent to around $1,675 an ounce, after falling to $1,661.01 on Tuesday, its lowest since August.


(Additional reporting by Ayai Tomisawa in Tokyo and Ian Chua in Sydney; Editing by Richard Borsuk)



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Hearing Into Litvinenko’s Death Still Leaves Motive a Mystery



But, after potentially explosive disclosures at a preinquest hearing last week, a more fundamental question seems to arise: Are the mysteries of his poisoning by the rare and highly toxic isotope polonium 210 approaching something akin to resolution, or are they simply condemned to deepen?


“The Alexander Litvinenko affair has been an unbelievably murky business,” The Times of London observed in an editorial. The more details become known, it said, “the murkier and muddier it seems to become.”


The hearing last week produced two major assertions that seemed to bear out that assessment.


One, by Hugh Davies, a lawyer acting for the inquest, seemed to substantiate the Litvinenko camp’s insistence that British government evidence not yet made public in detail “does establish a prima facie case as to the culpability of the Russian state in the death of Alexander Litvinenko,” who had become a British citizen weeks before his death.


The second, by Ben Emmerson, acting for Mr. Litvinenko’s wife, Marina, was that her husband was a “registered and paid agent” of Britain’s MI6 and of its Spanish counterpart, dealing with both in their investigations into Russian organized crime bosses and their links to political leaders in Moscow.


Between them, the two assertions raise tantalizing possibilities that could help fill the single biggest gap in the Litvinenko jigsaw: the question of a motive.


If Mr. Litvinenko was, as his adversaries in Russia have long maintained, a British agent, was that enough to justify a vengeful state conspiracy to silence or, at the least, make an example of him? Or does the Spanish connection offer a more plausible line of inquiry?


In 2010, American diplomatic cables released by WikiLeaks described the conclusions of a Spanish prosecutor, José Grinda González, in support of Mr. Litvinenko’s oft-voiced belief that the Russian security and intelligence services “control organized crime in Russia.” Was that the trigger for a killing?


“By passing on damaging secrets to Spain,” the columnist Kim Sengupta wrote in The Independent, “Mr. Litvinenko would have become a target for crime bosses who would have been able to use government agents to silence him.”


But that is where the story crosses into a world of flawed loyalties and double-dealing more familiar to the readers of a certain genre of novels. As the hearing revealed last week, in late 2006, Mr. Litvinenko had been about to embark on a journey to Spain to tell investigators about bonds between the Russian mafia and the Kremlin — a follow-up, according to an authoritative account in the Spanish newspaper El País, to a secret visit in May 2006, during which he provided critical information about Russian organized crime bosses. Months later, he was dead.


The twist in the latest disclosures was this: His companion on the second voyage was to have been another alumnus of the K.G.B., Andrei K. Lugovoi, a successful Russian businessman, who just happens to be the person British prosecutors have accused of poisoning Mr. Litvinenko.


By his own account, Mr. Lugovoi was present with several other Russians in the Pine Bar of the Millennium Hotel in London’s Grosvenor Square on Nov. 1, 2006, when Mr. Litvinenko ingested polonium, traces of which were later found on a teapot he had apparently used.


The two had met months before Mr. Litvinenko’s death, sharing an interest in the business of risk analysis, consultancy and information gathering in a world familiar to both of them.


In the years immediately after Mr. Litvinenko’s death, it was possible to cast it, as British prosecutors did, simply as the murder of a British citizen by a foreigner. (Mr. Lugovoi denies killing Mr. Litvinenko, and Russia has refused to send him to Britain to stand trial, citing constitutional prohibitions on the extradition of its own citizens.) After the latest assertions, however, the case shifted to a far more ominous plane — the alleged state killing of a state agent, a conspiracy on foreign soil, a throwback to the cold war.


Those considerations may be enough for both Moscow and London to try to draw back from the brink of a deeper freeze in the interests of cooperation in other areas, not least Russian energy and British investment.


The revelations at the preinquest hearing “threaten further to chill diplomatic relations between London and the Kremlin,” the editorial in The Times of London said, offering the harder-nosed view that it was “vital that relations between Moscow and London should not be held hostage to the Litvinenko case.”


Geopolitics apart, there has been another subplot.


Since the moment of her husband’s death, Mrs. Litvinenko has seemed to blend discomfort at her presence in the glare of news media coverage with a fierce determination to use her prominence there to push for justice and closure.


Yet, just as her campaign seems to be nearing a climax, she finds herself “in dire need of money to pay her lawyers,” said Alex Goldfarb a close associate of the Litvinenkos.


Previously the couple’s longtime sponsor had been the self-exiled entrepreneur Boris A. Berezovsky, a fiery foe of the Kremlin who fled Moscow in 2000 and has spent part of his time and money since then promoting President Vladimir V. Putin’s enemies.


But, since Mr. Berezovsky lost an astronomically expensive court case in London to a fellow tycoon, Roman A. Abramovich, this summer, his spending has been scaled back.


As Luke Harding, the author of critical book about the Moscow leadership, wrote in The Guardian, quoting an unidentified friend of Mr. Berezovsky, “Ironically, what the Kremlin could not do in a decade — shutting down Boris’s anti-Putin London operation — was done by a decision of an English court.”


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What If Nothing or Nobody is to Blame for Adam Lanza? Guns, Video Games, Autism or Authorities






What if there is nobody or nothing to blame for Adam Lanza‘s heinous acts? Other than Lanza, of course.


What if school security and the school psychiatrist kept an eye on Lanza since his freshman year? The Wall Street Journal has a compelling narrative about the red flags addressed.






What if he had a form of autism that has little or no link to violent behavior? Lanza may have had Asperger’s syndrome but, even so, that is not a cause.


(RELATED: How To Make Sense of America’s Confusing Patchwork of Gun Control Laws)


What if it’s too simple to lay the massacre at the feet of the gun lobby? Reader Larry Kelly tweets that shaming Aspies “makes about as much sense at stigmatizing the NRA. Pick an enemy … any enemy. Let outrage and fear rule.”


What if Lanza wasn’t provoked by video games? David Axelrod, a close friend an adviser of President Obama, tweeted last night: “In NFL post-game: an ad for shoot ‘em up video game. All for curbing weapons of war. But shouldn’t we also quit marketing murder as a game.”


When I asked whether he was laying groundwork for a White House initiative, Axelrod said no: “Just one man’s observation.” A senior administration official, speaking on condition of anonymity, said today that Axelrod was not a stalking horse for Obama on this issue.


What if Lanza’s mother did everything she could, short of keeping her guns out her adult son’s reach? What if he wasn’t bullied?


What if there is nobody or nothing to blame? Would that make this inexplicable horror unbearable?


What if we didn’t rush to judgement? What if we didn’t waste our thoughts, prayers and actions on assigning blame for the sake of mere recrimination? What if we calmly and ruthlessly learned whatever lessons we can from the massacre — and prevented the next one?


What if it wasn’t one thing, but everything, that set off Lanza?


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The Voice's Top Three Give Final Performances in the Competition






The Voice










12/17/2012 at 10:25 PM EST







From left: Judges Adam Levine, Cee Lo Green, Christina Aguilera and Blake Shelton


Trae Patton/NBC


Monday night's episode of The Voice gave the final three contestants three chances to earn fans' votes. Each singer revisited a "breakout" song that set them apart in the competition, sang a new song and performed a duet with his or her coach.

But the night opened with a touching tribute to the victims of the Sandy Hook tragedy. Coaches and singers held up the names of each life lost while singing Leonard Cohen's "Hallelujah."

Team Cee Lo's Nicholas David then kicked off the competition with Jerry Lee Lewis's "Great Balls of Fire." Not able to resist a pun, his coach chimed in on his performance: "Your fire tonight burned this house down," Green said. David later revisited his performance of Bill Withers's "Lean On Me," and joined Green for a duet of Wild Cherry's "Play That Funky Music."

Team Blake's two contestants also had the crowd cheering. Terry McDermott's sang his best song, Foreigner's "I Want to Know What Love Is," and took a stab at Mr. Mister's "Take These Broken Wings." But the crowning moment of the night for McDermott was his duet with Shelton of Aerosmith's "Dude (Looks Like a Lady)." Adam Levine played guitar alongside them, decked out in a long rocker wig.

Cassadee Pope sang "Over You," which her coach and his wife, Miranda Lambert, co-wrote. She received huge praise for singing it the first time, but the song about Shelton's late brother had special meaning in the wake of the shootings in Newtown, Conn. "America's heart is heavy, and that's about healing," Shelton said. She also moved the coaches with her take on Faith Hill's "Cry." "I don't care that you weren't on my team," Levine said. "I am so proud of you and so happy that you're here at this moment." Pope finished the night with Shelton for a duet of Sheryl Crow's "Steve McQueen."

The Voice returns Tuesday, when the season's winner will be named. Who will it be? Tell us in the comments below.

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Experts: No link between Asperger's, violence


NEW YORK (AP) — While an official has said that the 20-year-old gunman in the Connecticut school shooting had Asperger's syndrome, experts say there is no connection between the disorder and violence.


Asperger's is a mild form of autism often characterized by social awkwardness.


"There really is no clear association between Asperger's and violent behavior," said psychologist Elizabeth Laugeson, an assistant clinical professor at the University of California, Los Angeles.


Little is known about Adam Lanza, identified by police as the shooter in the Friday massacre at a Newtown, Conn., elementary school. He fatally shot his mother before going to the school and killing 20 young children, six adults and himself, authorities said.


A law enforcement official, speaking on condition of anonymity because the person was not authorized to discuss the unfolding investigation, said Lanza had been diagnosed with Asperger's.


High school classmates and others have described him as bright but painfully shy, anxious and a loner. Those kinds of symptoms are consistent with Asperger's, said psychologist Eric Butter of Nationwide Children's Hospital in Columbus, Ohio, who treats autism, including Asperger's, but has no knowledge of Lanza's case.


Research suggests people with autism do have a higher rate of aggressive behavior — outbursts, shoving or pushing or angry shouting — than the general population, he said.


"But we are not talking about the kind of planned and intentional type of violence we have seen at Newtown," he said in an email.


"These types of tragedies have occurred at the hands of individuals with many different types of personalities and psychological profiles," he added.


Autism is a developmental disorder that can range from mild to severe. Asperger's generally is thought of as a mild form. Both autism and Asperger's can be characterized by poor social skills, repetitive behavior or interests and problems communicating. Unlike classic autism, Asperger's does not typically involve delays in mental development or speech.


Experts say those with autism and related disorders are sometimes diagnosed with other mental health problems, such as depression, anxiety, bipolar disorder or obsessive-compulsive disorder.


"I think it's far more likely that what happened may have more to do with some other kind of mental health condition like depression or anxiety rather than Asperger's," Laugeson said.


She said those with Asperger's tend to focus on rules and be very law-abiding.


"There's something more to this," she said. "We just don't know what that is yet."


After much debate, the term Asperger's is being dropped from the diagnostic manual used by the nation's psychiatrists. In changes approved earlier this month, Asperger's will be incorporated under the umbrella term "autism spectrum disorder" for all the ranges of autism.


__


AP Writer Matt Apuzzo contributed to this report.


___


Online:


Asperger's information: http://1.usa.gov/3tGSp5


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Hopes rise for "fiscal cliff" deal as Obama, Boehner meet


WASHINGTON (Reuters) - The differences over how to resolve the "fiscal cliff" narrowed significantly Monday night as President Barack Obama made a counter-offer to Republicans that included a major change in position on tax hikes for the wealthy, according to a source familiar with the talks.


The move, which the source stressed was not Obama's final offer, was welcomed, albeit with reservations, by a spokesman for Republican House of Representatives Speaker John Boehner, who met earlier in the day with Obama as the two hammered out a way to avert steep tax hikes and indiscriminate spending reductions set for the beginning of 2013.


In its most dramatic change in position yet, the White House proposed leaving lower tax rates in place for everyone except those earning $400,000 and above, the source said on condition of anonymity. That's up from the $250,000 threshold the president has been demanding for months, but still far from Boehner's preference of $1 million.


Obama also moved closer to Boehner on the proportion of a ten-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4 trillion proposal.


Boehner's latest proposal calls for $1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take.


Some of the savings in spending proposed by Obama would come from reducing the size of cost-of-living increases for all but the most "vulnerable" recipients of the Social Security retirement program, the source said, through the use of a different formula to calculate the regular raises called "chained Consumer Price Index."


In the most hopeful sign, the source stressed that this was by no means the final offer from the White House.


The response from Boehner's spokesman was also a positive signal. "Any movement away from the unrealistic offers the president has made previously is a step in the right direction," the spokesman said, emphasizing that differences remain on spending levels in particular.


"We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem."


The rapid developments Monday evening put a deal realistically within reach.


The two men held talks at the White House earlier Monday and aides from both parties said they were optimistic an agreement was shaping up.


Though Obama and Boehner appeared to be edging closer to an agreement, substantial hurdles remain. Rank-and-file Republicans could have trouble with the tax increases on the wealthiest Americans that are likely to be part of any deal, while Obama could have a tough time selling spending cuts to his fellow Democrats.


But investors were cheered earlier Monday, before news broke of Obama's counter-offer, by signs of progress and the Standard & Poor's 500 index of U.S. stocks rose 1.19 percent.


Economists warn that going over the fiscal cliff could push the economy into recession.


Senate Democratic leader Harry Reid said his chamber will wrap up work on the issue after Christmas.


"It appears that we're going to be coming back the day after Christmas to complete work on the fiscal cliff," he said on the Senate floor.


Boehner faces a crucial test on Tuesday morning when he is expected to brief his party's lawmakers in the Republican-controlled House. He is not expected to bring any deal up for a vote unless a majority of the 241 House Republicans support it.


Republicans have campaigned for decades on a promise to keep taxes low, but Boehner in recent days has edged closer to Obama's demand to raise tax rates on top earners. In return, Obama could back a measure that would slow the rate of growth of Social Security benefits by changing the way they are measured against inflation, according to a Senate Democratic aide.


GETTING CLOSER ON TAXES


If there are no strong objections, he could try to finalize the deal with Obama on Wednesday, a Republican aide said.


Both sides declined to say what Boehner and Obama discussed at the meeting, which was also attended by Treasury Secretary Timothy Geithner.


The White House said Boehner's latest proposal does not meet its standards.


"Thus far, the president's proposal is the only proposal that we have seen that achieves the balance that is so necessary," White House spokesman Jay Carney said at a news briefing.


Republicans understand that the clock is ticking and they are confident that Boehner will get a deal they can support in the coming days, a senior House Republican aide said.


Republicans want substantial spending cuts in return for increased tax revenue, but any proposal to trim popular benefit programs like the Medicare health insurance plan for seniors will face fierce resistance from liberal Democrats, whose votes will be needed to get a deal passed.


Obama could also face strong opposition from Democrats if he agrees to Boehner's proposal to slow the growth of Social Security benefits by changing the way the cost-of-living increases are measured against inflation, an approach that could save $200 billion over 10 years.


Obama also wants to head off another confrontation over the U.S. debt limit, which will need to be raised in the coming months. Republicans insist that any increase in the government's $16.4 trillion borrowing authority must be paired with an equal reduction in spending.


(Additional reporting by Thomas Ferraro, Mark Felsenthal, Rachelle Younglai and Jeff Mason; Writing by Andy Sullivan; Editing by Alistair Bell, Eric Beech and Paul Simao)



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