Fiscal deal stalls as clock ticks to deadline

WASHINGTON (Reuters) - Efforts to prevent the economy from tumbling over a "fiscal cliff" stalled on Sunday as Democrats and Republicans remained at loggerheads over a deal that would prevent taxes for all Americans from rising on New Year's Day.

One hour before they had hoped to present a plan, Democratic and Republican Senate leaders said they were still unable to reach a compromise that would stop the automatic tax hikes and spending cuts that could push the U.S. economy back into recession.

"There are still serious differences between the two sides," said Senate Democratic leader Harry Reid.

Progress still appeared possible after the two sides narrowed their differences on tax increases and Republicans indicated they would withdraw a contentious proposal to slow the growth of Social Security retirement benefits.

Failure to secure a deal would deliver a heavy blow to the U.S. economy just as it is showing signs of a quicker recovery. Planned tax increases and spending cuts would suck $600 billion out of the economy and again force up unemployment, which had shown signs of improving.

Senate Republican leader Mitch McConnell talked several times to Vice President Joe Biden by phone in the hope of breaking the standstill. "I'm willing to get this done, but I need a dance partner," McConnell said.

Any agreement needs to be rushed through both chambers of Congress before midnight on Monday. But, even if the two sides reach a deal, procedural barriers in the Senate and the House of Representatives make quick action difficult.

Buoyed by his re-election in November, President Barack Obama has insisted that any deal must include a tax increase on the wealthiest Americans, who have seen their earnings rise steadily over the past decade at a time when income has stalled for the less affluent.

Many conservative Republicans in the House of Representatives oppose a tax hike on anyone, no matter how wealthy.

The two sides were close to agreeing to raise taxes on households earning around $400,000 or $500,000 a year - higher than Obama's preferred threshold of $250,000 - several senators told reporters.

Republicans aim to pair any tax increase with government spending cuts to benefit programs that are projected to grow ever more expensive as the population ages in coming decades.

But their proposal to slow the growth of Social Security benefits by changing the way they are measured against inflation met fierce resistance from Democrats. Obama included the proposal, known as "chained CPI," in an earlier proposal, but many of his fellow Democrats remain opposed.

'POISON PILL'

"We consider it a poison pill - they know we can't accept it. It is a big step back from where we were on Friday," a Senate Democratic aide said.

Several Senate Republicans said they would support taking that idea out of the discussion. "Most of us agree the chained CPI is off the table in these negotiations," Senator John McCain said on Twitter.

In a rare appearance on NBC's "Meet the Press," Obama pressured lawmakers to reach a deal.

"If people start seeing that on January 1st this problem still hasn't been solved... then obviously that's going to have an adverse reaction in the markets," he said, adding that he had offered Republicans significant compromises that had been rejected repeatedly.

Obama said he would try to reverse the tax hikes for most Americans if Congress fails to act.

John Boehner, the House speaker, rejected Obama's accusations that Republicans were not being amenable to compromise.

"The president's comments today are ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party," he said in a statement. (Additional reporting by Tabassum Zakaria, Jeff Mason, David Lawder, Fred Barbash and Richard Cowan. Writing by Andy Sullivan; editing by Alistair Bell and Jackie Frank)

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Purported photo of new BlackBerry phone with QWERTY keyboard leaks

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“The Hobbit” keeps box office crown for third week

(Reuters) – The dwarfs and elves of “The Hobbit: An Unexpected Journey” prevailed at the North American box office again over the weekend, as its $ 32.9 million in ticket sales topped both the star-packed musical “Les Miserables” and the western “Django Unchained.”

Despite surging past “The Hobbit” on Christmas day with an $ 18.1 million opening, “Les Miz” managed only third place in U.S. and Canadian sales with $ 28 million as Christmas shoppers returned from the malls to boost Hollywood‘s box office, according to studio estimates.

“The Hobbit,” in its third week of release, has now grossed $ 222.7 million domestically, Warner Bros said.

Quentin Tarantino’s “Django Unchained,” a western starring Jamie Fox as a slave turned bounty hunter, took second with an impressive $ 30.7 million.

Tom Cruise’s crime drama “Jack Reacher,” which features author Lee Child’s former military investigator solving a fatal sniper attack, landed in fifth with $ 14 million, outpaced by “Parental Guidance,” the Billy Crystal-Bette Midler as grandparents comedy which took in $ 14.8 million to nab fourth.

Chris Aronson, president of domestic distribution for Fox, said the “Parental Guidance” performance was “just a tremendous result for our little engine that could.”

Backed by a musical score that made it a Broadway icon, “Les Miz” surged past “The Hobbit” on Christmas day, collecting $ 18.1 million to pass “High School Musical 3: Senior Year” with the biggest midweek opening day by a musical.

But it was not enough to conquer the “Hobbit” juggernaut, which scored its third straight box office weekend win.

Universal’s president for domestic distribution Nikki Rocco called the “Les Miz” $ 28 million take “phenomenal, especially considering we went into the weekend with $ 40 million,” an unexpectedly strong figure for its first few days in release.

“People really love this movie, which is even more rewarding and gratifying,” Rocco said.

“Les Miserables,” which stars Hugh Jackman, Russell Crowe and Anne Hathaway, benefited from Oscar buzz and its star power, said Paul Dergarabedian, president of Hollywood.com’s box office division, who said he wouldn’t be surprised to see the musical pass $ 200 million before it’s done.

That would put it among the Hollywood‘s Top 20 best-selling musicals. It would pass the 1972 film “Cabaret,” which grossed $ 191 million in box office sales adjusted for higher ticket prices, and put it close to “Camelot,” which sold $ 204.5 million in 1967, according to the web site the-numbers.com.

The most successful musical is “Snow White and the Seven Dwarfs,” which grossed more than $ 6.3 billion but has been re-released by Walt Disney nine times since its 1937 premiere, according to the site.

A rush of high-profile films in December is expected to push 2012 to a domestic box office record. The current record is $ 10.6 billion, set in 2009.

“Jack Reacher” debuted just days after the Newtown, Connecticut, school shooting sparked new debate about the impact of movie violence. “Reacher” begins with a sniper killing a handful of seemingly random victims. A red-carpet premiere and a screening to promote the $ 60-million production were postponed after the December 14 Newtown tragedy.

Adult comedy “This is 40″ starring Paul Rudd and Leslie Mann as a middle-aged couple was sixth with $ 13.2 million. The Judd Apatow $ 35 million film totaled $ 37 million after two weeks. The seventh spot went to Steven Spielberg’s historical film “Lincoln,” with $ 7.5 million for a $ 132 million domestic total.

Comedy “The Guilt Trip,” starring Barbra Streisand and Seth Rogen as a mother and son on a cross-country drive, pulled in $ 6.7 million for eighth.

Also this week the latest James Bond hit “Skyfall” topped $ 1 billion in worldwide sales, despite falling out of the week’s top 10 films at the box office.

“The Hobbit” was distributed by Time Warner Inc’s Warner Bros studio. Paramount Pictures, a unit of Viacom Inc released, “Jack Reacher” and “The Guilt Trip.” Comcast Corp’s Universal Studios released “Les Miserables” and “This is 40.” “Django Unchained” was released in the United States by the Weinstein Company.

(Reporting By Ronald Grover; Editing by Cynthia Osterman)

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Dr. Rita Levi-Montalcini, a Revolutionary in the Study of the Brain, Dies at 103

Fabio Campana/European Pressphoto Agency

Rita Levi-Montalcini, the Italian Nobel laureate, in 2007.

Dr. Rita Levi-Montalcini, a Nobel Prize-winning neurologist who discovered critical chemical tools that the body uses to direct cell growth and build nerve networks, opening the way for the study of how those processes can go wrong in diseases like dementia and cancer, died on Sunday at her home in Rome. She was 103.

Her death was announced by Mayor Gianni Alemanno of Rome.

“I don’t use these words easily, but her work revolutionized the study of neural development, from how we think about it to how we intervene,” said Dr. Gerald D. Fishbach, a neuroscientist and professor emeritus at Columbia.

Scientists had virtually no idea how embryo cells built a latticework of intricate connections to other cells when Dr. Levi-Montalcini began studying chicken embryos in the bedroom of her house in Turin, Italy, during World War II. After years of obsessive study, much of it at Washington University in St. Louis with Dr. Viktor Hamburger, she found a protein that, when released by cells, attracted nerve growth from nearby developing cells.

In the early 1950s, she and Dr. Stanley Cohen, a biochemist also at Washington University, isolated and described the chemical, known as nerve growth factor — and in the process altered the study of cell growth and development. Scientists soon realized that the protein gave them a new way to study and understand disorders of neural growth, like cancer, or of degeneration, like Alzheimer’s disease, and to potentially develop therapies.

In the years after the discovery, Dr. Levi-Montalcini, Dr. Cohen and others described a large family of such growth-promoting agents, each of which worked to regulate the growth of specific cells. One, called epidermal growth factor and discovered by Dr. Cohen, plays a central role in breast cancer; in part by studying its behavior, scientists developed drugs to combat the abnormal growth.

In 1986, Dr. Levi-Montalcini and Dr. Cohen shared the Nobel Prize in Physiology or Medicine for their work.

Dr. Cohen, now an emeritus professor at Vanderbilt University, said Dr. Levi-Montalcini possessed a rare combination of intuition and passion, as well as biological knowledge. “She had this feeling for what was happening biologically,” he said. “She was an intuitive observer, and she saw that something was making these nerve connections grow and was determined to find out what it was.”

One of four children, Rita Levi-Montalcini was born in Turin on April 22, 1909, to Adamo Levi, an engineer, and Adele Montalcini, a painter, both Italian Jews who traced their roots to the Roman Empire. In keeping with the Victorian customs of the time, Mr. Levi discouraged his three daughters from entering college, fearing that it would interfere with their lives as wives and mothers.

It was not a future that Rita wanted. She had decided to become a doctor and told her father so. “He listened, looking at me with that serious and penetrating gaze of his that caused me such trepidation,” she wrote in her autobiography, “In Praise of Imperfection” (1988). He also agreed to support her.

She graduated summa cum laude from the University of Turin medical school in 1936. Two years later, Mussolini issued a manifesto barring non-Aryan Italians from having professional careers. She began her research anyway, setting up a small laboratory in her home to study chick embryos, inspired by the work of Dr. Hamburger, a prominent researcher in St. Louis who also worked with the embryos.

During World War II, the family fled Turin for the countryside, and in 1943 the invasion by Germany forced them to Florence. The family returned at the close of the war, in 1945, and Dr. Hamburger soon invited Dr. Levi-Montalcini to work for a year in his lab at Washington University.

She stayed on, becoming an associate professor in 1956 and a full professor in 1958. In 1962, she helped establish the Institute of Cell Biology in Rome and became its first director. She retired from Washington University in 1977, becoming a guest professor and splitting her time between Rome and St. Louis.

Italy honored her in 2001 by making her a senator for life.

An elegant presence, confident and passionate, she was a sought-after speaker until late in life. “At 100, I have a mind that is superior — thanks to experience — than when I was 20,” she said in 2009.

She never married and had no children. In addition to her autobiography, she was the author or co-author of dozens of research studies and received numerous professional awards, including the National Medal of Science.

“It is imperfection — not perfection — that is the end result of the program written into that formidably complex engine that is the human brain,” Dr. Levi-Montalcini wrote in her autobiography, “and of the influences exerted upon us by the environment and whoever takes care of us during the long years of our physical, psychological and intellectual development.”

This article has been revised to reflect the following correction:

Correction: December 30, 2012

An earlier version of this obituary misstated the year Mussolini issued a manifesto barring non-Aryan Italians from having professional careers. It was 1938, not 1936.

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Airlines' plans for 2013 up in the air

Airfares will be on the rise in 2013, and those niggling airline fees will metamorphose into optional bundles of services.

Meanwhile, onboard amenities, such as Internet access, entertainment options and refreshed interiors, will abound among U.S. carriers, but tight seating in coach probably won't improve.

And 2013 might be the year you'll finally be able to keep your smartphone, iPad or Kindle turned on during takeoffs and landings.

Those are some of the predictions airline industry experts foresee in the new year. Here's the lowdown on fares, fees and flight experience for 2013.

Higher fares forecast

Airlines pushed through six fare increases in 2012. Expect a similar number in the new year, said Rick Seaney, co-founder of FareCompare.com.

"I wouldn't be surprised to see airfares rise like they did this year, between 3 and 6 percent domestically," Seaney said. That's because airlines will succeed in properly balancing supply and demand by trimming the number of seats they offer to match "decent, but bordering on tepid, demand."

Fares are typically driven by four main factors: competition, most of all, then supply, demand and oil prices. "If you look at those drivers, they are, for the most part, on the airlines' side, which gives them pricing power," Seaney said.

That doesn't mean there won't be good airfare deals on some flights on some routes. And consumers will still see lower prices during off-peak days, such as Tuesday, Wednesday and Saturday departures and off-peak seasons, such as late January and early February. Like this year, summertime fares probably will stay relatively high, he said.

Airline mergers can also affect fares, and a huge one could take place early in 2013. American Airlines and US Airways are in talks about combining.

The general consensus among consumer advocates is that airline mergers aren't good for passengers.

"Any time you have two big airlines merging, that means consumers have less choice and competition is reduced, which only translates to higher prices," said Charlie Leocha, director of the Consumer Travel Alliance.

However, a bit of new evidence bucks that conventional wisdom. Despite four mega-mergers in the U.S. airline industry during the past seven years, fares have not increased significantly, just 1.8 percent per year, according to a December report from professional services firm PwC. In fact, average domestic fares decreased 1 percent from 2004 to 2011 when inflation is factored in, the report found.

Fliers know full well, however, that the fare isn't all that counts nowadays. There are those fees.

Fees get a makeover

The most noticeable trend in recent years with airline fees is that there are more of them: fees for checked bags, aisle seats, onboard meals, among many others. 

"What we hear is that people pay their fare and get to the airport and feel they're constantly being nickeled-and-dimed to death for things that used to be included," said Kate Hanni, founder of FlyersRights.org. 

The top five U.S. carriers alone generated more than $12 billion in fees in 2011, with even more expected through 2012, according to the PwC report.

What consumers call fees, airlines call "unbundling" — making a la carte choices from services that used to be included in the fare.

A likely trend for 2013 might be called "rebundling," airlines packaging a few now-optional services and charging for a tier of service.

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Obama: Fiscal talks 'good and constructive'

WASHINGTON (Reuters) - President Barack Obama and congressional leaders agreed on Friday to make a final effort to prevent the United States from going over the "fiscal cliff," setting off intense bargaining over Americans' tax rates as a New Year deadline looms.

The focus now turns to the Senate, where Harry Reid, the Democratic majority leader, and Mitch McConnell, who heads the Republican minority, will try to come up with a deal that can then be approved in the Republican-controlled House of Representatives before the end of the year.

Obama said he was "modestly optimistic" that an agreement could be found that would prevent taxes going up for almost all working Americans.

If things cannot be worked out in the Senate, Obama said he wanted both chambers in Congress to vote on a plan of his that would increase taxes only for households earning more than $250,000 a year.

The plan would also extend unemployment insurance for about 2 million Americans and set up a framework for a larger deficit reduction deal next year.

"The hour for immediate action is here. It is now. We're now at the point where in just four days, every American's tax rates are scheduled to go up by law. Every American's paycheck will get considerably smaller. And that would be the wrong thing to do," Obama told reporters.

He was speaking after an hour-long meeting in the White House with the two Senate leaders plus their counterparts in the House, Republican Speaker John Boehner and Democratic Minority Leader Nancy Pelosi.

A total of $600 billion in tax hikes and cuts to government spending will start kicking in on Tuesday if politicians cannot reach a deal, which could push the U.S. economy into a recession.

To prevent that, the two Senate leaders will plunge into talks on Saturday that will focus mainly on the threshold for raising income taxes on households with upper-level earnings.

They will also discuss whether the estate tax should be kept at current low levels or allowed to rise, a Democratic aide said.

The chances of success were unclear. Earlier talks between Obama and Boehner collapsed last week when several dozen anti-tax Republicans defied their leader and rejected a plan to raise rates for those earning $1 million and above.

The Democratic aide said Boehner stuck mainly to "talking points" in Friday's White House meeting, with the message that the House had acted on the budget and it was now time for the Senate to move. A core of fiscal conservatives in Boehner's caucus opposes any tax hikes at all, and House Republicans also want to see Obama commit to major spending cuts.

Pessimism about the fiscal cliff helped push U.S. stocks down on Friday for a fifth straight day. The Dow Jones industrial average dropped 158.20 points, or 1.21 percent.

(Additional reporting by David Lawder, Thomas Ferraro and Rachelle Younglai; Writing by Alistair Bell; Editing by Peter Cooney)

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Facebook Instagram use dived after photo fiasco: AppData

SAN FRANCISCO (Reuters) – Facebook Inc’s Instagram lost almost a quarter of its daily users a week after it rolled out and then withdrew policy changes that incensed users who feared the photo-sharing service would use their pictures without compensation.

Instagram, which Facebook bought for $ 715 million this year, saw the number of daily active users who accessed the service via Facebook bottom out at 12.4 million as of Friday, versus a peak of 16.4 million last week, according to data compiled by online tracker AppData.

The popular app, which allows people to add filters and effects to photos and share them over the Internet or smartphones, experienced the drop over the brief, often-volatile holiday period.

Other popular apps also saw slippage in usage, and some were more pronounced. Yelp, for instance, saw daily active users — again via Facebook — slide to a weekly low of half a million on Thursday, from a high of 820,000 one week ago.

Instagram disputed the AppData survey, which was compiled from users that have linked the photo service to their own Facebook accounts, historically between 20 and 30 percent of Instagram members.

“This data is inaccurate. We continue to see strong and steady growth in both registered and active users of Instagram,” a spokeswoman said in an emailed statement on Friday.

Looking out over a broader timeframe, Instagram’s monthly active users edged up to 43.6 million as of Friday, an increase of 1.7 million over the past seven days, according to AppData.

“We’ll have to monitor the data over the coming weeks to gain perspective on trends in Instagram’s performance,” AppData marketing manager Ashley Taylor Anderson said in an email.

ATTENTION-SEEKING

The sharp slide in activity highlighted by AppData was bound to draw attention on the heels of the controversial revision to Instagram’s terms of service that, among other things, allowed an advertiser to pay Instagram “to display your username, likeness, photos (along with any associated metadata)” without compensation.

The subsequent public outrage prompted an apology from Instagram founder Kevin Systrom. Last week, a California Instagram user sued the company for breach of contract and other claims, in what may have been the first civil lawsuit to stem from the controversial change.

Instagram subsequently reverted to some of its original language.

The move renewed debate about how much control over personal data users must give up to live and participate in a world steeped in social media.

Analysts say Facebook, the world’s largest social network, was laying the groundwork to begin generating advertising revenue, by giving marketers the right to display profile pictures and other personal information, such as who users follow in advertisements.

Its shares closed down 13 cents or 0.5 percent at $ 25.91 on the Nasdaq, in line with the broader market.

(Reporting By Edwin Chan; Editing by Leslie Adler and Andrew Hay)

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Actress Katie Holmes’ Broadway show to close

NEW YORK (Reuters) – Actress Katie Holmes‘ return to Broadway has been cut short, with producers announcing that the play “Dead Accounts” in which she co-stars will close on January 6, nearly two months early.

Holmes, the ex-wife of actor Tom Cruise, played Lorna, a wan, beaten-down woman living with her parents in the five-character play by Theresa Rebeck which opened on November 29 to mostly negative reviews.

No reason was given for the play’s early closing, but media reports said it was earning only a fraction of its box office potential.

Many reviewers said Holmes acquitted herself alongside a roster of Broadway veterans, who included Tony-winning actor Norbert Leo Butz as the brother who returns to his Midwestern family and unleashes havoc in the comedy.

The New York Daily News said “she throws herself gamely into her second Broadway show … (but) Holmes’ efforts add up to zilch.”

Most critics laid blame on an undeveloped, sketchy play by the author of last season’s better-received “Seminar.”

Holmes, 34, reached a high-profile divorce settlement with Cruise last summer. She lives in New York with her young daughter, Suri. Holmes will co-star in an upcoming film which will be a modernization of Chekhov’s “The Seagull” along with Allison Janney and William Hurt.

(Reporting by Chris Michaud; Editing by Patricia Reaney and Vicki Allen)

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Surgery Returns to NYU Langone Medical Center

Chang W. Lee/The New York Times

Senator Charles E. Schumer spoke at a news conference Thursday about the reopening of NYU Langone Medical Center.

NYU Langone Medical Center opened its doors to surgical patients on Thursday, almost two months after Hurricane Sandy overflowed the banks of the East River and forced the evacuation of hundreds of patients.

While the medical center had been treating many outpatients, it had farmed out surgery to other hospitals, which created scheduling problems that forced many patients to have their operations on nights and weekends, when staffing is traditionally low. Some patients and doctors had to postpone not just elective but also necessary operations for lack of space at other hospitals.

The medical center’s Tisch Hospital, its major hospital for inpatient services, between 30th and 34th Streets on First Avenue, had been closed since the hurricane knocked out power and forced the evacuation of more than 300 patients, some on sleds brought down darkened flights of stairs.

“I think it’s a little bit of a miracle on 34th Street that this happened so quickly,” Senator Charles E. Schumer of New York said Thursday.

Mr. Schumer credited the medical center’s leadership and esprit de corps, and also a tour of the damaged hospital on Nov. 9 by the administrator of the Federal Emergency Management Agency, W. Craig Fugate, whom he and others escorted through watery basement hallways.

“Every time I talk to Fugate there are a lot of questions, but one is, ‘How are you doing at NYU?’ ” the senator said.

The reopening of Tisch to surgery patients and associated services, like intensive care, some types of radiology and recovery room anesthesia, was part of a phased restoration that will continue. Besides providing an essential service, surgery is among the more lucrative of hospital services.

The hospital’s emergency department is expected to delay its reopening for about 11 months, in part to accommodate an expansion in capacity to 65,000 patient visits a year, from 43,000, said Dr. Andrew W. Brotman, its senior vice president and vice dean for clinical affairs and strategy.

In the meantime, NYU Langone is setting up an urgent care center with 31 bays and an observation unit, which will be able to treat some emergency patients. It will initially not accept ambulances, but might be able to later, Dr. Brotman said. Nearby Bellevue Hospital Center, which was also evacuated, opened its emergency department to noncritical injuries on Monday.

Labor and delivery, the cancer floor, epilepsy treatment and pediatrics and neurology beyond surgery are expected to open in mid-January, Langone officials said. While some radiology equipment, which was in the basement, has been restored, other equipment — including a Gamma Knife, a device using radiation to treat brain tumors — is not back.

The flooded basement is still being worked on, and electrical gear has temporarily been moved upstairs. Mr. Schumer, a Democrat, said that a $60 billion bill to pay for hurricane losses and recovery in New York and New Jersey was nearing a vote, and that he was optimistic it would pass in the Senate with bipartisan support. But the measure’s fate in the Republican-controlled House is far less certain.

The bill includes $1.2 billion for damage and lost revenue at NYU Langone, including some money from the National Institutes of Health to restore research projects. It would also cover Long Beach Medical Center in Nassau County, Bellevue, Coney Island Hospital and the Veterans Affairs hospital in Manhattan.

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Wall Street ends sour week with 5th straight decline

NEW YORK (Reuters) - Stocks fell for a fifth straight day on Friday, dropping 1 percent and marking the S&P 500's longest losing streak in three months as the federal government edged closer to the "fiscal cliff" with no solution in sight.

President Barack Obama and top congressional leaders met at the White House to work on a solution for the draconian debt-reduction measures set to take effect beginning next week. Stocks, which have been influenced by little else than the flood of fiscal cliff headlines from Washington in recent days, extended losses going into the close with the Dow Jones industrial average and the S&P 500 each losing 1 percent, after reports that Obama would not offer a new plan to Republicans. The Dow closed below 13,000 for the first time since December 4.

"I was stunned Obama didn't have another plan, and that's absolutely why we sold off," said Mike Shea, managing partner at Direct Access Partners LLC in New York. "He's going to force the House to come to him with something different. I think that's a surprise. The entire market is disappointed in a lack of leadership in Washington."

In a sign of investor anxiety, the CBOE Volatility Index , known as the VIX, jumped 16.69 percent to 22.72, closing at its highest level since June. Wall Street's favorite fear barometer has risen for five straight weeks, surging more than 40 percent over that time.

The Dow Jones industrial average dropped 158.20 points, or 1.21 percent, to 12,938.11 at the close. The Standard & Poor's 500 Index lost 15.67 points, or 1.11 percent, to 1,402.43. The Nasdaq Composite Index fell 25.59 points, or 0.86 percent, to end at 2,960.31.

For the week, the Dow fell 1.9 percent. The S&P 500 also lost 1.9 percent for the week, marking its worst weekly performance since mid-November. The Nasdaq finished the week down 2 percent. In contrast, the VIX jumped 22 percent for the week.

Pessimism continued after the market closed, with stock futures indicating even steeper losses. S&P 500 futures dropped 26.7 points, or 1.9 percent, eclipsing the decline seen in the regular session.

All 10 S&P 500 sectors fell during Friday's regular trading, with most posting declines of 1 percent, but energy and material shares were among the weakest of the day, with both groups closely tied to the pace of growth.

An S&P energy sector index slid 1.8 percent, with Exxon Mobil down 2 percent at $85.10, and Chevron Corp off 1.9 percent at $106.45. The S&P material sector index fell 1.3 percent, with U.S. Steel Corp down 2.6 percent at $23.03.

Decliners outnumbered advancers by a ratio of slightly more than 2 to 1 on the New York Stock Exchange, while on the Nasdaq, two stocks fell for every one that rose.

"We've been whipsawing around on low volume and rumors that come out on the cliff," said Eric Green, senior portfolio manager at Penn Capital Management in Philadelphia, who helps oversee $7 billion in assets.

With time running short, lawmakers may opt to allow the higher taxes and across-the-board federal spending cuts to go into effect and attempt to pass a retroactive fix soon after the new year. Standard & Poor's said an impasse on the cliff wouldn't affect the sovereign credit rating of the United States.

"We're not as concerned with January 1 as the market seems to be," said Richard Weiss, senior money manager at American Century Investments, in Mountain View, California. "Things will be resolved, just maybe not on a good timetable, and any deal can easily be retroactive."

Trading volume was light throughout the holiday-shortened week, with just 4.46 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT on Friday, below the daily average so far this year of about 6.48 billion shares. On Monday, the U.S. stock market closed early for Christmas Eve, and the market was shut on Tuesday for Christmas. Many senior traders were absent this week for the holidays.

Highlighting Wall Street's sensitivity to developments in Washington, stocks tumbled more than 1 percent on Thursday after Senate Majority Leader Harry Reid warned that a deal was unlikely before the deadline. But late in the day, stocks nearly bounced back when the House said it would hold an unusual Sunday session to work on a fiscal solution.

Positive economic data failed to alter the market's mood.

The National Association of Realtors said contracts to buy previously owned U.S. homes rose in November to their highest level in 2-1/2 years, while a report from the Institute for Supply Management-Chicago showed business activity in the U.S. Midwest expanded in December.

"Economic reports have been very favorable, and once Congress comes to a resolution, the market should resume an upward trend, based on the data," said Weiss, who helps oversee about $125 billion in assets. "All else being equal, we see any further decline as a buying opportunity."

Barnes & Noble Inc rose 4.3 percent to $14.97 after the top U.S. bookstore chain said British publisher Pearson Plc had agreed to make a strategic investment in its Nook Media subsidiary. But Barnes & Noble also said its Nook business will not meet its previous projection for fiscal year 2013.

Shares of magicJack VocalTec Ltd jumped 10.3 percent to $17.95 after the company gave a strong fourth-quarter outlook and named Gerald Vento president and chief executive, effective January 1.

The U.S.-listed shares of Canadian drugmaker Aeterna Zentaris Inc surged 13.8 percent to $2.47 after the company said it had reached an agreement with the U.S. Food and Drug Administration on a special protocol assessment by the FDA for a Phase 3 registration trial in endometrial cancer with AEZS-108 treatment.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)

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