With record highs in sight, stocks face roadblocks

NEW YORK (Reuters) - If Wall Street needs to climb a wall of worry, it will have plenty of opportunity next week.

Major U.S. stock indexes will make another attempt at reaching all-time records, but the fitful pace that has dominated trading is likely to continue. Next Friday's unemployment report and the hefty spending cuts that look like they about to take effect will be at the forefront.

The importance of whether equities can reach and sustain those highs is more than Wall Street's usual fixation on numbers with psychological significance. Breaking through to uncharted territory is seen as a test of investors' faith in the rally.

"It's very significant," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"The thinking is, there's just not enough there for an extended bull run," he said. "If we do break through (record highs), then maybe the charts and price action are telling us there's something better ahead."

Flare-ups in the euro zone's sovereign debt crisis and next Friday's report on the U.S. labor market could jostle the market, though U.S. job indicators have generally been trending in a positive direction.

Small- and mid-cap stocks hit lifetime highs in February. Now the Dow Jones industrial average <.dji> and the S&P 500 <.spx> are racing each other to the top. The Dow, made up of 30 stocks, is about 75 points - less than 1 percent - away from its record close of 14,164.53, which it hit on October 9, 2007. The broader S&P is still 3 percent away from its closing high of 1,565.15, also reached on October 9, 2007.

The advantage may be in the Dow's court. So far in 2013, it has gained 7.5 percent, beating the S&P 500 by about 1 percent.

THE RALLY AND THE REALITY CHECK

The Dow's relative strength owes much to its unique make-up and calculation, as well as to investors' recent preference for buying value stocks likely to generate steady reliable gains, rather than growth stocks.

But the more defensive stance illustrates how stock buyers are getting concerned about this year's rally. While investors don't want to miss out on gains, they're picking up companies that are less likely to decline as much as high-flying names - if a market correction comes.

The Russell Value Index <.rav> is up 7.6 percent for the year so far, outpacing the Russell Growth Index's <.rag> 5.7 percent rise. Within the realm of the S&P 500, the consumer staples sector led the market in February, gaining 3.1 percent.

There is some concern that growth-oriented names are being eclipsed by defensive bets, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

"This isn't a be-all and end-all sell signal by any means, but we would feel much more comfortable if some of the more aggressive areas, like technology and small caps, would start to gain some leadership here," Detrick said.

Signs that investors are becoming concerned about the rally's pace is evident in the options market, where the ratio of put activity to call activity has recently shifted in favor of puts, which represent expectations for a stock to fall.

"We are seeing some put hedging in the financials, building up for the past month," said Henry Schwartz, president of options analytics firm Trade Alert in New York.

The put-to-call ratio representing an aggregate of about 562 financial stocks is 1:1, when normally, calls should be outnumbering puts.

Investors have no shortage of reasons to crave the relative safety of blue chips and defensive stocks. Although markets have mostly looked past uncertainty over Washington's plans to cut the deficit, fiscal policy negotiations still pose a risk to equities.

The $85 billion in spending cuts set to begin on Friday is expected to slow economic growth this year if policymakers do not reach a new deal. Markets so far have held firm despite the wrangling in Washington, but tangible economic effects could pinch stock prices going forward.

The International Monetary Fund warned that full implementation of the cuts would probably take at least 0.5 percentage point off U.S. growth this year.

EASY MONEY AND TEPID HIRING

Investors will also take in a round of economic data at a time when concerns are percolating that the market is being pushed up less by fundamentals and more by loose monetary policy around the world.

The main economic event will be Friday's non-farm payrolls report for February. The U.S. economy is expected to have added 160,000 jobs last month, only a tad higher than in January, in a sign the labor market is healing at a slow pace. The U.S. unemployment rate is forecast to hold steady at 7.9 percent.

While lackluster data has been a catalyst in the past for stock market gains as investors bet it would ensure continued stimulus from the Federal Reserve, that sentiment may be wearing thin.

Markets stumbled last week following worries that the Fed might wind down its quantitative easing program sooner than expected.

"It shows the underpinning of the market is being driven at this point by monetary policy," Hellwig said.

With investors questioning what is behind the rally, it will make a run to record highs even more significant, Hellwig added.

"There's smart people that are in the bull camp and the bear camp and the muddle-through camp," Hellwig said. "The fact that you can statistically, using historical evidence, make a case for going higher, lower, or staying the same makes this number very important this time around."

(Wall St Week Ahead runs every Friday. Comments or questions on this column can be emailed to: leah.schnurr(at)thomsonreuters.com)

(Reporting by Leah Schnurr; Additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)

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U.S. evolves on same-sex marriage

STORY HIGHLIGHTS

• The president and the nation have shifted perspectives on same-sex marriage


• Supreme Court ruling on California's same-sex marriage ban a critical test


• Growing public support for gay marriage give proponents hope for change

Washington (CNN) -- The nation's growing acceptance of same-sex marriage has happened in slow and painstaking moves, eventually building into a momentum that is sweeping even the most unlikely of converts.

Even though he said in 2008 that he could only support civil unions for same-sex couples, President Barack Obama nonetheless enjoyed strong support among the gay community. He disappointed many with his conspicuously subdued first-term response to the same-sex marriage debate.

Last year, after Vice President Joe Biden announced his support, the president then said his position had evolved and he, too, supported same-sex marriage.

So it was no small matter when on Thursday the Obama administration formally expressed its support of same-sex marriage in a court brief weighing in on California's Proposition 8, which bans same-sex weddings. The administration's effort was matched by at least 100 high-profile Republicans — some of whom in elections past depended on gay marriage as a wedge issue guaranteed to rally the base — who signed onto a brief supporting gay couples to legally wed.

Obama on same-sex marriage: Everyone is equal

Then there are the polls that show that an increasing number of Americans now support same-sex marriage. These polls show that nearly half of the nation's Catholics and white, mainstream Protestants and more than half of the nation's women, liberals and political moderates all support same-sex marriage.

According to Pew Research Center polling, 48% of Americans support same-sex marriage with 43% opposed. Back in 2001, 57% opposed same-sex marriage while 35% supported it.

In last year's presidential election, same-sex marriage scarcely raised a ripple. That sea change is not lost on the president.

"The same evolution I've gone through is the same evolution the country as a whole has gone through," Obama told reporters on Friday.

Craig Rimmerman, professor of public policy and political science at Hobart and William Smith colleges says there is history at work here and the administration is wise to get on the right side.

"There is no doubt that President Obama's shifting position on Proposition 8 and same-sex marriage more broadly is due to his desire to situate himself on the right side of history with respect to the fight over same-sex marriage," said Rimmerman, author of "From Identity to Politics: The Lesbian and Gay Movements in the United States."

"I also think that broader changes in public opinion showing greater support for same-sex marriage, especially among young people, but in the country at large as well, has created a cultural context for Obama to alter his views."

For years, Obama had frustrated many in the gay community by not offering full-throated support of same-sex marriage. However, the president's revelation last year that conversations with his daughters and friends led him to change his mind gave many in that community hope.

Last year, the Obama administration criticized a measure in North Carolina that banned same-sex marriage and made civil unions illegal. The president took the same position on a similar Minnesota proposal.

Obama administration officials point to what they see as the administration's biggest accomplishment in the gay rights cause: repealing "don't ask, don't tell," the military's ban on openly gay and lesbian members serving in the forces.

Then there was the president's inaugural address which placed the gay community's struggle for equality alongside similar civil rights fights by women and African-Americans.

"Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law, for if we are truly created equal, then surely the love we commit to one another must be equal, as well," Obama said in his address after being sworn in.

In offering its support and asserting in the brief that "prejudice may not be the basis for differential treatment under the law," the Obama administration is setting up a high stakes political and constitutional showdown at the U.S. Supreme Court over a fast-evolving and contentious issue.

The justices will hear California's Proposition 8 case in March. That case and another appeal over the federal Defense of Marriage Act will produce blockbuster rulings from the justices in coming months.

Beyond the legal wranglings there is a strong social and historic component, one that has helped open the way for the administration to push what could prove to be a social issue that defines Obama's second term legacy, Rimmerman said.

The nation is redefining itself on this issue, as well.

Pew survey: Changing attitudes on gay marriage

The changes are due, in part, to generational shifts. Younger people show a higher level of support than their older peers, according to Pew polling "Millennials are almost twice as likely as the Silent Generation to support same-sex marriage."

"As people have grown up with people having the right to marry the generational momentum has been very, very strong," said Evan Wolfson, president of Freedom to Marry, a gay rights organization.

That is not to say that there isn't still opposition.

Pew polling found that most Republicans and conservatives remain opposed to same-sex marriage. In 2001, 21% of Republicans were supportive; in 2012 that number nudged slightly to 25%.

Conservative groups expressed dismay at the administration's same-sex marriage support.

"President Obama, who was against same-sex 'marriage' before he was for it, and his administration, which said the Defense of Marriage Act was constitutional before they said it was unconstitutional, has now flip-flopped again on the issue of same-sex 'marriage,' putting allegiance to extreme liberal social policies ahead of constitutional principle," Family Research Council President Tony Perkins said in a statement.

But there are signs of movement even among some high profile Republican leaders

Top Republicans sign brief supporting same-sex marriage

The Republican-penned friend of the court brief, which is designed to influence conservative justices on the high court, includes a number of top officials from the George W. Bush administration, Mitt Romney's former campaign manager and former GOP presidential candidate Jon Huntsman.

It is also at odds with the Republican Party's platform, which opposes same-sex marriage and defines marriage as a union between a man and a woman.

Still, with White House and high-profile Republican support, legal and legislative victories in a number of states and polls that show an increasing number of Americans support same sex-marriage, proponents feel that the winds of history are with them.

"What we've seen is accelerating and irrefutable momentum as Americans have come to understand who gay people are and why marriage matters," Wolfson said. "We now have a solid national majority and growing support across every demographic. We have leaders across the spectrum, including Republicans, all saying it's time to end marriage discrimination."

CNN's Peter Hamby, Ashley Killough and Bill Mears contributed to this report.

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Redflex execs out as scandal grows in red light camera firm

The president, chief financial officer and top lawyer for Chicago's red light camera company resigned this week amid an escalating corruption scandal that has cost Redflex Traffic Systems Inc. its lucrative, decadelong relationship with the city.

The resignations came as Redflex said it was winding down a company-funded probe into allegations of an improper relationship between the company and the former city transportation manager who oversaw its contract until 2011, a relationship first disclosed by the Tribune in October. A longtime friend of that city manager was hired by Redflex for a high-paid consulting deal.

The company recently acknowledged it improperly paid for thousands of dollars in trips for the former city official, the latest in a series of controversial revelations that have shaken Redflex from its Phoenix headquarters to Australia, the home of parent company Redflex Holdings Ltd.

Mayor Rahm Emanuel's administration banned the company from competing for the upcoming speed camera contract and went further last month by announcing that Redflex would lose its red light contract when it expires in June. The Chicago program, with more than 380 cameras, has been the company's largest in North America and is worth about 13 percent of worldwide revenue for Redflex Holdings. Since 2003 it has generated about $100 million for Redflex and more than $300 million in ticket revenue for the city.

In an email addressed to all company employees, Redflex Holdings CEO and President Robert T. DeVincenzi announced the resignations of three top executives in Phoenix: Karen Finley, the company's longtime president and chief executive officer; Andrejs Bunkse, the general counsel; and Sean Nolen, the chief financial officer. Their exits follow those of the chairman of the board of Redflex Holdings, another Australian board member and the company's top sales executive who Redflex has blamed for much of its Chicago problems.

"Today's announcement of executive changes follows the conclusion of our investigation in Chicago and marks the dividing line between the past and where this company is headed," said DeVincenzi, who took over as CEO of the Phoenix company. "This day, and each day going forward, we intend to be a constructive force in our industry, promoting high ethical standards and serving the public interest."

The company also held town hall meetings in Arizona to unveil reforms, including new requirements to put all company employees through anti-bribery and anti-corruption training, hiring a new director of compliance to ensure that employees adhere to company policies and establishing a 24-hour whistle-blower hotline.

The resignations and a second consecutive halt to public trading of the company's stock are the latest in a string of events that followed Tribune reports last year regarding 2-year-old internal allegations of corruption in the Chicago contract that the company previously said were investigated and discounted.

The scandal now enveloping the company centers on its relationship to former Chicago transportation official John Bills, who retired in 2011 after overseeing the company's contract since it began in 2003.

A whistle-blower letter obtained by the Tribune said Bills received lavish vacations directly on the expense report of a company executive and raised questions about improper ties between Bills and a Redflex consultant who received more than $570,000 in company commissions.

Bills and the consultant, a longtime friend, have denied wrongdoing.

The company told the Tribune in October that its investigation into the 2010 letter found only one instance of an inadvertent expenditure for Bills, a two-day hotel stay at the Arizona Biltmore expensed by the executive. Redflex lawyer Bunkse told the newspaper that the company responded by sending the executive to "anti-bribery" training and overhauling company expense procedures.

But after additional Tribune reports, the company hired a former Chicago inspector general, David Hoffman, to conduct another investigation. Hoffman made an interim report of his findings to company board members this month. That report prompted the company officials to acknowledge a much deeper involvement with Bills, including thousands of dollars for trips to the Super Bowl and White Sox spring training over many years.

The chairman of the company's Australian board of directors resigned, trading on company stock was temporarily suspended and the company acknowledged that it is sharing information with law enforcement.

Trading was halted again this week pending more details about the company's latest actions.

dkidwell@tribune.com

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Tax on pack of cigarettes sold in Chicago up $1 to $6.67

On the eve of a $1-per-pack Cook County cigarette tax increase, County Board President Toni Preckwinkle stood in the glow of X-rays showing damaged lungs, surrounded by some of Stroger Hospital's top pulmonary specialists as she discussed how smoking shortens people's lives.

The setting and talking points made clear the message Preckwinkle wanted to convey Thursday: This is a public health problem, one she plans to fight by giving smokers an incentive to quit and teens a reason not to start.

But the county's tax increase is more than just a campaign to protect people from emphysema and lung cancer. Preckwinkle is counting on $25.6 million this year from the move to help balance the budget. The history of cigarette tax increases suggests the county will be lucky to get that much in 2013 and should expect diminishing returns in the years ahead.

Smokes are a financial well that public officials have gone to repeatedly to shore up shaky finances at the local and state level. When the county tax increase takes effect Friday, a pack of cigarettes purchased in Chicago will come with $6.67 tacked on by the city, county and state. That's just behind New York City's nation-leading $6.86 in taxes per pack. It will also push the cost of a pack of cigarettes in Chicago to as much as $11.

Recent cigarette tax increases have had only a short-term benefit to the government bottom line. Some people quit, while others buy cigarettes online or outside the county or state.

When the county last raised the cigarette tax — by $1 per pack in 2006 — collections initially shot up by $46.5 million, hitting $203.7 million, county records show. But by 2009, the county collected $20.4 million less than it had in 2005.

Mayor Richard M. Daley bumped up the city of Chicago's share of the cigarette tax by 32 cents in 2005 and another 20 cents in 2006, to 68 cents per pack. He saw collections rise from $15.6 million in 2004 to $32.9 million in 2006, according to a city report. But city cigarette tax revenue fell to $28.4 million in 2007, and continued dropping to $18.7 million by 2011, records show.

At the state level, Quinn pushed through a $1-a-pack hike in June.

Before that, state lawmakers and Gov. George Ryan agreed on a 40-cent increase in 2002. Cigarette tax proceeds went up by more than $178 million in 2003, to $643.1 million, and rose to $729.2 million in 2004. The revenue then fell steadily to $549 million by 2010 before edging back up to $580 million last year, according to state records.

The county is preparing for the windfall from the $1 increase to be strong this year, then decline. County officials project that after bringing in $25.6 million for the remainder of this budget year, the increase will net about $29 million for 2014, $21 million in 2015, $15 million in 2016 and just $9 million in 2017.

Preckwinkle says that's OK with her.

"My hope would be that over the long run this is no longer a way in which governments look to raise money, because fewer and fewer people are smoking," she said. "So I would hope that we have the effect of reducing our revenue because more people quit."

The county could end up saving money as cigarette tax revenue falls because uninsured people with ailments related to smoking are such a heavy financial burden to the public hospital system, Preckwinkle said.

In the meantime, Preckwinkle pledged to hire more staff this year to crack down on stores selling untaxed packs and large-scale tobacco smuggling from surrounding states. "We anticipate that there may be some noncompliance, as there always is when you institute an increase like this," she said.

Preckwinkle also acknowledged that the higher tax rate will push some smokers into surrounding counties or Indiana to pick up their packs, but she predicted such cross-border runs will not last.

"While people may initially, when the prices rise, go to other states — Indiana, Wisconsin or wherever — over time that trek gets very tiresome and time-consuming, and they return to their former habits of buying their cigarettes nearby," Preckwinkle said.

But David Vite, president of the Illinois Retail Merchants Association, said he thinks the cigarette taxes in Cook County are now so high compared with surrounding areas that smokers will continue to make the longer drive, and Illinois stores near jurisdictions with lower taxes will struggle even more.

"You might see people return to their old patterns if we were talking about a slight disparity, say 25 cents a pack," Vite said. "But now we're talking about a difference of nearly $3 a pack compared to Indiana, almost $30 a carton. You're going to see guys working in factories saying, 'It's my week to make a run,' heading to Indiana and coming back with $1,500 worth of cigarettes for all their co-workers."

jebyrne@tribune.com

Twitter @_johnbyrne

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Cardinals begin long process of picking new pope

VATICAN CITY (Reuters) - With Pope Benedict XVI now officially in retirement, Catholic cardinals from around the world begin on Friday the complex, cryptic and uncertain process of picking the next leader of the world's largest church.

Some details are still unclear, owing to Benedict's break with the tradition that papacies end with a pope's death, so these "princes of the Church" will first hold an informal session before traditional rounds of talks begin on Monday.

No front-runner stands out among the 115 cardinal electors - those aged under 80 - due to enter the Sistine Chapel for the conclave that picks the new pope, so discreetly sizing up potential candidates will be high on the cardinals' agenda.

They will also use the general congregations, the closed-door consultations preceding a conclave, to discuss future challenges such as better Vatican management, the need for improved communication and the continuing sexual abuse crisis.

Benedict ended his difficult eight-year reign on Thursday pledging unconditional obedience to whoever succeeds him to lead the world's 1.2 billion Catholics at one of the most problematic periods in the Church's 2,000-year history.

"The discussion we have in the congregations will be most important for the intellectual preparation" for choosing a pope, said Boston's Cardinal Sean O'Malley, adding the electors were already preparing spiritually for the vote by intense prayer.

"I would imagine each of us has some kind of list of primary candidates, and others secondary," said Cardinal Francis George of Chicago at a media briefing with O'Malley and another American cardinal, Daniel DiNardo of Galveston-Houston.

MOST SECRETIVE ELECTION

Conclaves are among the world's most secretive elections, with no declared candidates, no open campaigning and electors who often do not know more than a few dozen men in the room. Electors are sworn to secrecy about the actual voting itself.

George said cardinals consulted other electors before the conclave to learn more about possible choices, asking "what do you know about this candidate?" or "what kind of person is he?"

O'Malley, at his first conclave and already being mentioned in Italian media as a potential candidate, said he had been "using the Internet a lot" to read up on other cardinals.

Conclaves traditionally begin 15 days after the seat of St. Peter, as the papal office is called, becomes vacant. But that includes time for mourning and funeral ceremonies for a dead pope, so Benedict issued a decree allowing an earlier start.

From Monday, the cardinals will discuss how long they want to hold general congregations before going into the conclave; its name comes from the Latin term "cum clave" - with a key - to show they are locked away until a pope is chosen.

Cardinals over 80 cannot join them in the voting, but they are allowed to attend the general congregations and discuss the challenges to the Church with the electors.

Nothing is set yet, but the Vatican seems to be aiming for an election by mid-March so the new pope can be installed in office before Palm Sunday on March 24 and lead Holy Week services culminating in Easter the following Sunday.

HELICOPTER INTO HISTORY

The cardinals will not see a top secret report prepared for Pope Benedict on mismanagement and infighting in the Curia, the Church's bureaucracy. But its three cardinal authors will be in the general congregations to advise electors on its findings.

"Since we don't really know what's in the report, I think we'll depend on the cardinals in the congregations to share with us what they think will be valuable for us to know to make the right decision for the future," O'Malley said.

In an emotional farewell to cardinals on Thursday morning in the Vatican's frescoed Sala Clementina, Benedict appeared to send a strong message to the cardinals and the faithful to unite behind his successor, whoever he turns out to be.

The appeal was significant because for the first time in history, there will be a reigning pope in the Vatican's Apostolic Palace and his retired predecessor living in a small monastery in the Vatican Gardens not far away.

Benedict left the Vatican by helicopter for the papal summer residence of Castel Gandolfo south of Rome to be far from the conclave and not influence it. He will move into the monastery when refurbishing is finished in about two months.

(Editing by Alastair Macdonald)

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Stock index futures point to slightly higher open

LONDON (Reuters) - Stock index futures pointed to a slightly higher open on Wall Street on Thursday.

Futures for the S&P 500 and the Dow Jones rose 0.2 percent, while contracts on the Nasdaq 100 were up 0.1 percent at 0852 GMT.

European shares also rose as investors took heart from fresh signs that central banks would continue steps to support the world's economy.

Revised U.S. GDP data at 1330 GMT is expected to show the U.S. economy grew by 0.5 percent in the fourth quarter, rather than a 0.1 percent contraction as initially estimated.

Weekly new jobless claims figures, due at the same time, are seen slowing to 360,000 from 362,000 in the previous seven days.

February's Chicago PMI, due out at 1445 GMT, is expected to come in at 54.3, from 55.6 last month.

Liberty Media Corp , which holds a large stake in Barnes & Noble, said on Wednesday it had the power to block a sale of Barnes & Nobles' retail stores and it is waiting to see whether the bookseller's chairman Leonard Riggio will make an offer.

J.C. Penney Co Inc on Wednesday reported its sharpest sales drop since announcing a grand transformation plan 13 months ago, sending shares in the department store operator's shares down 14.5 percent in after hours trading.

Groupon Inc lost a quarter of its market value in after hours trading on Wednesday after the company revealed it began to take a smaller cut of revenue on daily deals during the holidays, sacrificing revenue and profits to attract and keep merchants.

Business software provider Salesforce.com and clothes retailer Gap are due to report results after the market close.

U.S. authorities investigating possible insider trading in ketchup maker H.J. Heinz Co are studying a derivatives bet that was routed through London, the New York Times reported, citing two people briefed on the matter.

Bond insurer MBIA Inc said there was a significant risk that its structured finance insurance unit would be put into liquidation or rehabilitation by its New York regulator if it was unable to settle its claims with Bank of America .

Generic drugmaker Mylan Inc said it will buy a unit of India's Strides Arcolab Ltd for $1.6 billion to expand its presence in the fast-growing injectable drugs market.

The U.S. Justice Department said on Wednesday it has won a $1 billion tax shelter case against Dow Chemical Co that involved a Swiss partnership, Wall Street financial giant Goldman Sachs and international law firm King & Spalding.

The Dow Jones industrial average <.dji> was up 176.32 points, or 1.27 percent, at 14,076.45 on Wednesday. The Standard & Poor's 500 Index <.spx> was up 19.07 points, or 1.27 percent, at 1,516.01. The Nasdaq Composite Index <.ixic> was up 32.61 points, or 1.04 percent, at 3,162.26.

(Reporting by Francesco Canepa; Editing by Alison Williams)

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Knicks overcome Curry's 54 to beat Warriors

NEW YORK (AP) — Stephen Curry rose for another jumper, and by then even the Knicks probably figured it would go in.

Curry had hardly missed in a scintillating second half of the NBA's most electric performance this season, the crowd cheering even before the ball left his hands.

This time, Raymond Felton jumped with him, making the play New York needed to finally withstand Curry.

Felton's blocked shot led to J.R. Smith's tiebreaking basket with 1:10 left, and the Knicks overcame Curry's NBA season-high 54 points to beat the Golden State Warriors 109-105 on Wednesday night.

Curry was 18 of 28 from the field, finishing one shy of the NBA record with 11 3-pointers in 13 attempts, in a performance that had the crowd hanging on his every shot. But the Knicks and Felton finally stopped him with 1:28 to play and the score tied at 105.

"My main thing is to keep playing. Like I said, once a guy gets it going like that, there's nothing I can really do. I've still got to stay in my mindset, still play my game, and I was still able to come up with some big plays at the end," Felton said. "We all came up with some big plays to get that win."

Carmelo Anthony followed Smith's basket with another one and the Knicks hung on to spoil former Knicks star and Warriors coach Mark Jackson's homecoming.

Anthony finished with 35 points and Smith had 26.

"We made the defensive stops we needed to make down the stretch," Knicks coach Mike Woodson said.

Playing all 48 minutes, Curry finished with seven assists and six rebounds while passing his previous career best of 42 points, and Kevin Durant's 52-point performance that had been the best in the NBA this season.

"I felt good all night. Obviously played the whole game, so was just trying to keep my legs underneath me on the offensive end, and you know, just stick to the game on the defensive end," Curry said. "Once I started seeing that 3-ball go down in transition, all sorts of spots on the floor, I knew it was going to be a good night."

But he had little help without All-Star forward David Lee, who was suspended one game for his role in an altercation Tuesday night in Indiana.

Tyson Chandler had 16 points and a career-best 28 rebounds for the Knicks, who won their second straight after a season-high, four-game losing streak. Amare Stoudemire had 14 points and Anthony added eight assists on the day the Knicks learned they could be without reserve forward Rasheed Wallace for the rest of the season because he needs surgery to repair a broken bone in his left foot.

Strutting all over the court whenever one of his 3s swished easily through the nets, Curry easily blew past the 38 points he scored Tuesday in Indiana, which had been his best of the season. That was spoiled when he was fined $35,000 for his role in the skirmish, which was essentially getting thrown to the ground by Roy Hibbert when he tried to intervene.

This performance — the most points by an NBA player in a loss since Kobe Bryant had 58 in a loss to Charlotte on Dec. 29, 2006 — was spoiled along with Jackson's trip back to his old home because of a few mistakes down the stretch.

Curry threw away a pass on the break with 3:13 left, and Jarrett Jack was called for a travel following Smith's go-ahead basket.

Plus, Klay Thompson finished 3 of 13 from the field, missing two straight from deep in the final minute.

Jackson, who grew up in Brooklyn and starred at St. John's before being drafted by the Knicks in 1987, didn't get a chance to coach here last season as an NBA rookie on the bench because of the lockout. He brought his wife, Desiree, to a road game for the first time this season, had his mother in the stands, and got a chance to see people he remembered from playing here years earlier.

He said he hadn't gotten to look ahead much to the game because of the schedule, but clearly enjoyed being back in Madison Square Garden once the day did arrive.

"This is a special place and it was part of my dreams as a kid," he said.

His night turned into Curry's, fans cheering even before the ball left his hand in the second half.

"We were short-handed and we needed a performance like that to have a chance," Jackson said. "He put on a clinic. Knocked down shots. Made plays. Carried us. Led us in rebounding. He did it all. I've seen a lot of great performances in this building and his goes up there. I've seen a lot. I've seen a lot, but that shooting performance was a thing of beauty."

The Knicks, who hadn't played since Sunday, looked ready to blow the Warriors out early, taking a 25-11 lead that the Warriors trimmed to 27-18 at the end of the first period before surging ahead behind Curry.

He scored 12 straight Golden State points, cutting it to 35-34 with his third 3-pointer of the second quarter. He followed Richard Jefferson's 3 with another one, giving the Warriors a 40-37 advantage. The Knicks recovered and went back ahead by nine late in the period before Curry answered with six consecutive points, and New York's lead was 58-55 at the break.

"He's a special young player with a very unique talent," Chandler said. "We ran everything at him. He just got hot. There was some shots that he couldn't have seen the rim."

Curry's drive gave the Warriors a two-point lead three minutes into the third quarter, but he didn't score again until hitting a turnaround 3 from 27 feet with 5 seconds left in the period, giving him 38 points again and cutting New York's lead to 84-81.

Already without Andrew Bogut because of a back injury, the Warriors had little size without Lee. Their lineup at one point in the second quarter had nobody taller than 6-foot-9 and Chandler simply climbed over them all night.

He came in leading the league with 4.4 offensive rebounds per game, and grabbed 13 boards in the first quarter alone.

Notes: Chandler was also the last NBA player to grab 13 rebounds in one quarter, hauling in 14 in the third quarter for Dallas on Dec. 1, 2010. ... Wallace, who hasn't played since December, will have surgery this week and the expected recovery time is eight weeks. Woodson said he didn't plan to waive the 38-year-old forward and create a roster spot, instead hoping he could be able to play in the postseason. ... Kenyon Martin, signed last week in part because of the uncertainty around Wallace, made his Knicks debut and was scoreless in 5 first-half minutes.

___

Follow Brian Mahoney on Twitter: http://www.twitter.com/Briancmahoney

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Taiwan ebullient over Ang Lee's Oscar

STORY HIGHLIGHTS

• Ang Lee's name beamed on building in Taiwan after Oscar win


• Lee, born in Taiwan, won award for best director for "Life of Pi"


• Lee's win created excitement in Taiwan and China, both claimed him as their own


• Ryan: "In some ways it feels like 'Linsanity' all over again"

Editor's note: Andrew Ryan is a host and producer at Radio Taiwan International, a government-owned station that broadcasts in several languages and countries. He first came to Taiwan in 1996 as a Fulbright scholar and has spent the last 16 years as a translator and observer of politics and culture.

Taipei (CNN) -- It's not every territory in the world that puts an Oscar-winning director's name up in lights on a towering building. But that's just the sort of thing that happens in Taiwan -- and it did on Monday night after Ang Lee picked up his second "Best Director" Oscar, this time for "Life of Pi."

The moment wasn't just celebrated in grand statements, but in small scenes played out in front of televisions across Taiwan when his name was announced.

I was at a TV station in Taipei that was broadcasting live coverage of the Oscars, working with a team of translators that was creating the subtitles for the rebroadcast. When Lee's name was announced the office erupted in applause. Down the hallway, more cheering could be heard.

READ: Oscar winners: Analysis of who won

I couldn't help but think back to the Athens Games in 2004, when Chen Shih-hsin won Taiwan's first ever Olympic gold medal (under the team name "Chinese Taipei"). Even veteran news anchors shed tears when the young taekwondo star defeated her Cuban rival.

It would be reductive to suggest that these displays of patriotism are simply the response of a small country that just doesn't crank out that many Oscar winners or Olympic golds. It also speaks of a place that has been largely marginalized in the international community.

Today, Taiwan has just 23 official diplomatic allies -- mostly other marginalized nations, in Central America and Africa. That's because China still sees Taiwan as part of its territory more than 60 years after the Chinese Nationalists retreated to the island at the end of a Civil War against the Communists. The Nationalists -- or Kuomintang -- are now the ruling party in a democratic Taiwan, which is officially called the Republic of China (ROC) -- not to be confused with the People's Republic of China on the Mainland.

Having lost its seat at the United Nations to the PRC in 1971, the ROC found itself with a diminished voice in the international community. It turned to manufacturing and technology in the 1980s, spurring on what is now referred to as an "economic miracle." Today, with its economy struggling to move past the global economic downturn, Taiwan has added the arts, sports, and even baking to its repertoire.

READ: Oscars 2013: Hollywood gets political

What's striking about Lee's win is that it's not just people in Taiwan who were quick to claim him as one of their own. In China, the state-run Xinhua news agency referred to him as "Chinese-American." While Taiwanese media latched onto the portion of Lee's acceptance speech when he thanked Taiwan and the central city of Taichung where much of the movie was filmed, Xinhua's main story included Lee's line of thanks to the 3,000 people who worked on the film for "believing this story and sharing this incredible journey with me."

In some ways it feels like "Linsanity" all over again, when Taiwan and China both claimed basketball star Jeremy Lin as their own, leaving the international media struggling to chart the dangerous waters of identity politics to correctly describe him.

VIEW: Photos from the red carpet

A very small voice at the fringe of the discussion wonders why it's important for people to know that Lin's paternal grandmother lives in Taiwan and referred to him as "a real Taiwanese," or that Lee grew up in Tainan and still loves to visit his favorite noodle shop there. Others in Taiwan question why a nation's confidence should be based on its success in the international community.

When Ang Lee's name was announced, the office erupted in applause. Down the hallway, more cheering could be heard.
Andrew Ryan

With China looming to the north, now the world's second biggest economy and wielding an influence that's verging on "superpower" status, the metaphor of Jonah and the whale comes to mind. The Taiwanese electorate is sharply divided on how it feels about the way ties with China have warmed ever since President Ma Ying-jeou first took office in 2008. The benefits are obvious, considering China is Taiwan's largest trade partner, but some worry that it could lead to a loss in autonomy.

INTERACTIVE: Oscars by numbers

The Ma administration has been mindful of the nationalistic rhetoric of the opposition, and although the president was born in Hong Kong, he has referred to himself in the past as "Taiwanese as well as Chinese." Ma was also quick to congratulate Lee following the Oscars, and to urge others to follow in the director's footsteps and "work hard at promoting Taiwan to the world."

Lee is just one name on a growing list of national heroes that both the government and the private sector have celebrated in recent years for putting Taiwan on the map: people like fashion designer Jason Wu, who moved to Canada from Taiwan and has created garments for U.S. First Lady Michelle Obama; master baker Wu Pao-chun, who beat the French patissiers at their own competition -- Les Masters de la Boulangerie in 2010; Yani Tseng, the world's number one female golfer; and even the humble vegetable seller-turned-philanthropist Chen Shu-chu, who was selected by Time Magazine as one of its heroes of 2010.

So what are people saying when they embrace these heroes as Taiwanese? They are saying "Taiwan may be small and diplomatically isolated, but it deserves to have a voice in the international community." While Lee may not speak about politics and no longer creates movies about Taiwan, he does have a voice and people do listen. And that's worth spreading in lights across the world's second-tallest building.

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The opinions expressed in this commentary are solely those of Andrew Ryan.

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Chicago archdiocese to close 5 schools in cost-cutting move

Budget cuts announced Wednesday by the Archdiocese of Chicago signal that the area's Roman Catholics are entering a period of austerity when there will be less money for their parishes and schools.

The cuts, which were officially announced as Cardinal Francis George and other leaders of the church gathered at the Vatican to select a new pope, include closing five schools, eliminating 75 positions at the archdiocese's headquarters and placing a moratorium on loans to parishes from the archdiocese bank for three years. Other changes include creating stricter guidelines for local parishes applying for subsidies and reducing the number of the agencies in the archdiocese.

George, who spoke publicly about the cuts when asked by reporters in Rome, said they are needed to address the archdiocese's chronic financial problems. The archdiocese has run deficits of more than $30 million annually over the last four years, including being $40 million in the red for the fiscal year ending in June 2012.

All told, the measures will save tens of millions of dollars over the next few years, officials said.

“The expenses have gone up, and the income is pretty well flat,” George said after a news conference in Rome about Pope Benedict XVI's last audience Wednesday in St. Peter's Square. “We tried to ride out the recession without making any changes — and we can't do that. We're giving more grants to parishes and schools that need more money. The budget is not balanced. Not just layoffs, but a lot of other things being done, other ways to use the resources we have.”

The archdiocese sold $150 million in bonds in 2012 that helped it get through a cash-flow problem, but ultimately that wasn't enough, George said. He hopes the cuts will enable the archdiocese to balance its budget in two years.

Although the cardinal's announcement made headlines, the archdiocese's financial situation has been no secret to its priests. Several clergymen said they knew the archdiocese had planned to scale back loans to parishes.

“We have already made adjustments,” said the Rev. Dennis Ziomek of St. Barbara Parish in Chicago's Bridgeport neighborhood. “We have to be responsible stewards with the money.”

In a letter posted on the archdiocese website, the cardinal thanked parishioners for their generosity and asked them to pray for the employees now out of a paycheck.

At the archdiocese's Pastoral Center headquarters on Wednesday, people funneled in and out of the building during their lunch breaks but declined comment on the layoffs. Before the announcement, staffers received memos asking them to report to their desks early Wednesday.

Of the 75 positions, 55 were full-time jobs. Sixty people were let go, while the remaining posts had been vacant. Those cuts are expected to save $11 million to $13 million annually by fiscal 2015, George wrote in his letter.

Employees who received pink slips will get job counseling, extended health benefits and generous severance packages.

“We're keeping up counseling for helping people find jobs, looking for places where they might look for jobs,” George said.

Along with the layoffs, the archdiocese will reduce the number of capital loans and grants it gives parishes, while creating “stricter criteria” for them to qualify for the financial assistance.

A Parish Transformation initiative in the works for at least two years will also try to save money by laying out measures to provide more financial stability, though the letter did not give details.

Those cuts are expected to save an additional $13 million to $15 million annually by fiscal 2015, the letter states.

By next year, the archdiocese will reduce its aid to Catholic schools by $10 million. It plans to give scholarships to children affected by the five school closings so they can attend nearby Catholic schools. Officials said low enrollment was a key factor for closing the schools: St. Gregory the Great High, St. Paul-Our Lady of Vilna Elementary and St. Helena of the Cross Elementary in Chicago, plus St. Bernardine in Forest Park and St. Kieran in Chicago Heights.

Now, Catholic schools will start relying on scholarships for student financial aid instead of grants from the archdiocese to make tuition affordable, Superintendent Sister Mary Paul McCaughey said.

She pointed to a new partnership with the Big Shoulders Fund, a charity supporting urban Catholic schools, that will help families pay for school with scholarships.

McCaughey did not expect tuition at other Catholic schools to immediately rise because grants from the archdiocese have been reduced. About two-thirds of schools already have posted their tuition rates for the upcoming school year, she added.

“Although things are challenged, I think (Chicago) is a Catholic community that's always supported its schools,” McCaughey said. “I think the support will be there.”

Outside of St. Bernardine Elementary in west suburban Forest Park, one of the schools that will close this summer, Maria Maxham said she was devastated when she heard last month that she'd have to send her children, one in second grade and the other in fourth grade, to a different school.

Maxham, who lives in Forest Park, said she is not sure the two will attend another local Catholic school because some lack what she thought was St. Bernardine's strength.

“There is so much diversity at St. Bernardine, and that's part of what makes it so fantastic,” Maxham said. “It was a special place and a second family for us.”

The school, which has been open since 1915, has about 100 students currently enrolled in its preschool-through-eighth-grade classrooms.

Administrators, teachers and parents were notified of the closing in January, when McCaughey led a meeting at the school and explained the large amount of money that the archdiocese needed to reduce from the schools budget, Principal Veronica Skelton Cash said.

One family left the school shortly after hearing the news, she added.

Cash, who joined the school in the fall, said there was much frustration among staff members afterward. Many believed they would have at least a few years to turn things around.

“I could see a lot of things changing for the better at this school,” Cash said. “The culture of the community is changing, and we were getting more and more inquiries about the school. There was momentum going forward.”

Current employees were given guidance on severance and benefits by the archdiocese's human resources officials, Cash said. Teachers without jobs will also be placed on a priority list for future employment with the archdiocese, she said.

“I'm incredibly disheartened,” said Daniel Kwarcinski, who hopes to find a job at another private school after teaching art for seven years at St. Bernardine. “There's a need for a school like this where we are at.”

In Rome, George said the decisions to let people go and reduce aid were not easy. But he reiterated that the archdiocese's financial situation drove the decision.

“We have to balance the budget, especially if it's precarious,” he said. “The growth being very slow means we can no longer ignore the kinds of deficit situations that have been imposed on us. We have to take action.”

Tribune reporter Manya A. Brachear reported from Rome, with Tribune reporters Bridget Doyle and Jennifer Delgado in Chicago.

mbrachear@tribune.com

bdoyle@tribune.com

jmdelgado@tribune.com

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Shares, euro rebound, Italy bond sale in focus

LONDON (Reuters) - Reassurance from the U.S. Federal Reserve about its stimulus program helped stabilize the euro and European shares on Wednesday, as Italy prepared to test the reaction to its inconclusive election in the bond market.

Italy will auction up to 6.5 billion euros of new 5- and 10-year bonds at around 1000 GMT after gridlocked elections reignited fears about the euro zone debt crisis.

"Markets have started to price in risks of ungovernability of the country in the coming months, with possible domino effects on the rest of the euro area," said Newedge economist Annalisa Piazza.

"Political instability is expected to prevail ...and even a grand coalition government would be seen only as a temporary option, probably not able to continue the so-much needed reforms process."

Having fallen sharply on Tuesday following the Italian stalemate, European shares <.fteu3> rebounded 0.4 percent as trading resumed with 0.8 percent rises in Milan's FTSE MIB <.ftmib> and Spain's IBEX <.ibex> the leading the gains.

The mood was helped after Federal Reserve Chairman Ben Bernanke defended the U.S. central bank's monetary stimulus on Tuesday, easing financial market worries over a possible early retreat from bond purchases.

The euro also regained ground, rising 0.2 percent to $1.3085 having hit a seven-week low of $1.3017 on Tuesday.

In the bond market Italian yields, which rise as prices fall, inched up again, while German government bonds , a favourite of risk-adverse investors, also added to this week's hefty gains.

"Italy remains the centre of attention and I can't see it getting any better," one trader said. "Supply will be the main focus and ... it could be a bit of a problem."

(Editing by Anna Willard)

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Minnesota takes down No. 1 Indiana 77-73

MINNEAPOLIS (AP) — Retaining that No. 1 national ranking has been elusive throughout this wild season in college basketball, and Indiana was the latest to lose at the top — again.

Most important and maybe more challenging for the Hoosiers, however, is holding on to first place in the tough-as-ever Big Ten.

Trevor Mbakwe had 21 points on 8-for-10 shooting and 12 rebounds to help Minnesota take down top-ranked Indiana 77-73 on Tuesday night, the seventh time the No. 1 team in the Associated Press poll has lost this season. Three of those losses were by the Hoosiers, who were No. 1 when they fell to Butler and Wisconsin earlier this season. All three opponents were unranked at the time.

Indiana (24-4, 12-3) has held the No. 1 ranking for 10 of the 17 polls by the AP this season, including the last four, and that will likely change next week. But fending off Michigan, Michigan State and Wisconsin is what's on the minds of the Hoosiers, who'll take a one-game lead in the conference race into Saturday's game against Iowa.

"Winning the Big Ten was going to be tough whether we won today or lost," said star guard Victor Oladipo, who had 16 points. "We knew it was going to be tough from the jump. Now it's even tougher. But I think my team is ready for it. We just have to go back and see what we did wrong and correct it."

Andre Hollins added 16 points for the Gophers (19-9, 7-8), who outrebounded Cody Zeller and the Hoosiers by a whopping 44-30 and solidified their slipping NCAA tournament hopes with an emphatic performance against the conference leader. The fired-up fans swarmed the court as the last seconds ticked off, the first time that's happened here since a 2002 win over Indiana.

"There were just too many times when that first shot went up and they were there before we were because we didn't get into their bodies," Hoosiers coach Tom Crean said. "We weren't physical enough on the glass. That's the bottom line."

Zeller, the second-leading shooter in the Big Ten, went 2 for 9. He had nine points with four turnovers. Minnesota had 40 points in the paint to Indiana's 22.

Mbakwe, a sixth-year senior, had a lot to do with that. While positing his conference-leading seventh double-double of the season, the 24-year-old Mbakwe was a man among boys in many ways in this game, dominating both ends of the court when the Gophers needed him most. He grabbed six of Minnesota's 23 offensive rebounds, two of them to keep a key possession alive. His off-balance put-back drew contact for a three-point play with 7:22 left that gave the Gophers a 55-52 lead.

Mbakwe was called for a loudly questioned blocking foul, his fourth, with 4:39 remaining on Zeller's fast-break layup and free throw that put the Hoosiers up 59-58. But Austin Hollins answered with a pump-fake layup that drew a foul for a three-point play and a two-point advantage for the Gophers.

The Hoosiers didn't lead again, and Joe Coleman's fast-break dunk with 2:35 left gave Minnesota a 68-61 cushion that helped it withstand a couple of 3-pointers by Christian Watford and one by Jordan Hulls in the closing minutes. That was the only basket Hulls made after halftime. He had 17 points.

"Just the way we bounced back is unbelievable. We showed that we can beat one of the best teams in the country. Now we have to build off this," said Mbakwe, whose team lost eight of its previous 11 games starting with an 88-81 loss at Indiana on Jan. 12. The Gophers were ranked eighth then. They didn't even receive a vote in the current poll. That could change next week.

The Hoosiers are still in position for their first outright Big Ten regular-season championship since 1993. With another home game against Ohio State on March 5, Indiana could still clinch the title before the finale at Michigan on March 10.

For now, though, the Hoosiers have to regroup and re-establish their inside game after the trampling in the post they endured here.

"They were relentless on the glass. We just didn't do a great job of boxing them out," Oladipo said.

___

Follow Dave Campbell on Twitter: http://www.twitter.com/DaveCampbellAP

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Yahoo CEO right to cut remote work

STORY HIGHLIGHTS

• Raymond Fisman: Marissa Mayer needs to revive Yahoo, and face time at the office is key


• Fisman: Granted, this goes against Utopian vision of everyone working from cafes


• Fisman: In-person work means innovations, avoids misunderstood directives


• He says more jobs will get done and it'll encourage those who work in a half-empty office

Editor's note: Raymond Fisman is the Lambert Family professor of social enterprise at the Columbia Business School. He is the co-author, with Tim Sullivan, of "The Org: The Underlying Logic of the Office."

(CNN) -- When Yahoo's relatively new CEO Marissa Mayer decreed that workers would be required to show up at the office rather than work remotely, the immediate backlash from outsiders was mostly on the side of the angry Yahoo employees who were losing the comfort and convenience of telecommuting. Inside the company, reactions were mixed.

It struck a deep chord, contrary as it was to the techno-utopian impulse that has helped define Silicon Valley: the idea that someday soon we'll all be working in coffee shops or at kitchen tables, with broadband connections replacing in-person interactions.

Mayer may have been extreme in her demands for face time at the office, but it's the right call for a leader who is working to turn around one of the Internet's laggards.

Raymond Fisman

First, let's consider what's at stake for the company and what Mayer is hoping to accomplish. Yahoo is famous for having bungled its position as a one-time Internet leader. Mayer was brought on specifically to revitalize the benighted company after the departure of Jerry Yang; the firing of Carol Bartz, and the departures of another CEO who inflated his resume and an interim director. All the while, Yahoo has been a company in search of a direction.

What does the end of telecommuting have to do with giving the company a sound footing? The reasons go well beyond the obvious issue of reining in slackers who have taken advantage of Yahoo's reportedly lax monitoring of work done from home.

Talk Back: Is Yahoo wrong to end telecommuting?

Jackie Reses, Yahoo's head of human relations, has it exactly right in the memo she wrote to employees about the policy: Personal interaction is still the most effective way of conveying a company's direction, and keeping tabs on what different parts of the organization are up to. And that's what Mayer has to do with all of Yahoo's 11,500 employees to succeed.

What do in-person meetings accomplish that e-mail can't? Part of the answer lies in time use surveys of CEOs that go back nearly 40 years.

Management scholar Henry Mintzberg was among the first to track how top managers spend their time in the early 1970s. Much to his surprise, he found that around 80% of their time was spent in face-to-face meetings; the subjects of his study had few stretches of more than 10 minutes at a time to themselves.

More recent time use studies by researchers at Harvard, the London School of Economics and Columbia have found that little has changed. Despite the IT revolution, business leaders still spend 80% of their time in face-to-face meetings.

The reason is that there's only so much that one can glean from a written report or a spreadsheet. To cut through the hidden agendas, and office politics, most of the time you need to look someone in the eye and ask them, "Really? How exactly would that work?" It is this probing and questioning that allows effective managers to gather the scraps of information needed to understand what's really going on.

Similarly, all the way down the organizational chart, person-to-person interactions are crucial to ensure that an organization's change of direction isn't misrepresented or garbled in its retelling.

The bland proclamations made in reports and e-mails are given clearer meaning through the way they're communicated in the "high fidelity" that only personal interaction will allow. In-person meetings can also help teams avoid misunderstandings: As one of our friends who runs a virtual workplace puts it, with e-mail exchanges alone, everyone starts to get a bit paranoid.

Finally, the Yahoo memo notes that it's hard to innovate via e-mail exchanges or the occasional agenda-filled meeting. New ideas spring up through chance encounters in the cafeteria line and impromptu office meetings. It's an assertion that's backed up by academic research highlighting the importance of physical proximity in driving scientific progress.

Work at home? Share productivity tips

Yet there are rarely benefits without cost. Lots of tasks are easily managed from a distance. A large number of the affected Yahoo employees are customer-service representatives who aren't going to be driving innovation at the company anyway.

In one study of telecommuting at a Chinese online travel agency, customer-service reps were both happier and more productive when working from home -- probably Yahoo service reps aren't any different from their Chinese counterparts in this regard. And every Yahoo employee surely has some aspects of their jobs that could be done just as well at the kitchen table as in an office cubicle.

But it's hard to create a norm of "physically together" if the office is always half-empty. And once it becomes that way, the half that have been showing up will be less and less inclined to bother. Finally, such a shocking and provocative directive will most certainly have the effect of imbuing the organization with the sense of urgency it needs to get the job done.

Will Yahoo employees come around to appreciating the change? Not necessarily the ones that liked to sleep in or work on a startup on Yahoo's dime, but it may be welcomed by the ones already showing up. Will it be damaging to morale? Possibly, though it may help Yahoo employees to remember that, if they're successful, the change is likely to be temporary.

But the job of the CEO isn't to maximize worker happiness. It's to make sure they get their jobs done. And in driving change at Yahoo, Mayer thinks they need to show up at the office.

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The opinions in this commentary are solely those of Raymond Fisman.

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Kelly easily wins Democratic race to replace Jackson Jr.

Former state Rep. Robin Kelly easily won the special Democratic primary Tuesday night in the race to replace the disgraced Jesse Jackson Jr. in Congress, helped by millions of dollars in pro-gun control ads from New York Mayor Michael Bloomberg's political fund.

A snowstorm and lack of voter interest kept turnout low as Kelly had 52 percent to 25 percent for former U.S. Rep. Debbie Halvorson and 11 percent for Chicago 9th Ward Ald. Anthony Beale with 99 percent of precincts counted.

Kelly will formally take on the winner of the Republican primary in an April 9 special general election in the heavily Democratic district. In the GOP contest, less than 25 votes separated convicted felon Paul McKinley and businessman Eric Wallace.

Kelly framed her win as a victory for gun control forces.

"You sent a message that was heard around our state and across the nation," Kelly told supporters in a Matteson hotel ballroom. "A message that tells the NRA that their days of holding our country hostage are coming to an end.

"To every leader in the fight for gun control ready to work with President (Barack) Obama and Mayor (Rahm) Emanuel to stop this senseless violence, thank you for your leadership and thank you for your courage," she said.

Halvorson told supporters to rally around Kelly as the Democratic nominee. But Halvorson also made it clear she believed her biggest opponent was the mayor of New York, whose anti-gun super political action committee spent more than $2.2 million attacking her previous support from the National Rifle Association while backing Kelly.

"We all know how rough it was for me to have to run an election against someone who spent ($2.2) million against me," Halvorson said at Homewood restaurant. "Every 71/2 minutes there was a commercial."

Bloomberg's Independence USA PAC was the largest campaign interest in the race and dominated the Chicago broadcast TV airwaves compared to a marginal buy by one minor candidate.

Beale also called Bloomberg's influence "the biggest disservice in this race."

"If this is the future of the Democratic Party, then we are all in big trouble," Beale said.

Bloomberg, an Emanuel ally in the fight for tougher gun restrictions, called Kelly's win "an important victory for common sense leadership on gun violence" as well as sign that voters "are demanding change" in a Congress that has refused to enact tougher gun restrictions, fearing the influence of the NRA.

But as much as Bloomberg sought to portray the Kelly win as a victory over the influential NRA, the national organization stayed out of the contest completely while the state rifle association sent out one late mailer for Halvorson.

Be it the TV ads or a late consolidation toward Kelly in the campaign, the former Matteson lawmaker made an impressive showing with Democratic voters in suburban Cook County, where the bulk of the district's vote was located, as well as on the South Side.

Despite the size of the field, Kelly got more than half of the votes cast in the two most populated areas of the district. Halvorson won by large percentages over Kelly in Kankakee County and the district's portion of Will County, but those two areas have very few votes.

The special primary election, by its nature, already had been expected to be a low-turnout affair — an expedited contest with little time for contenders to raise money or mount a traditional campaign.

Adding to the lack of interest was the fact that there were no other contests on the ballot in Chicago and most of the suburban Cook County portion of the district. Few contests were being held in Kankakee County and the portion of Will County within the 2nd District.

Turnout was reported to be around 15 percent in the city and suburban Cook. More than 98 percent of the primary votes cast in Chicago were Democratic, as were 97 percent of those cast in suburban Cook.

On the Republican side, the unofficial vote leader was McKinley, 54, who was arrested 11 times from 2003 to 2007, mostly for protesting, with almost all of the charges dropped. In the 1970s and '80s, McKinley was convicted of six felony counts, serving nearly 20 years in prison for burglaries, armed robberies and aggravated battery. He previously declined to discuss the circumstances of those crimes but has dubbed himself the "ex-offender preventing the next offender" in his campaign.

Records show McKinley also owes $14,147 in federal taxes, which might explain his answer at a forum when asked if he would cut any federal programs. "Certainly," he said. "The IRS."

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Bernanke to face Fed critics in testimony to Congress

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke faces the first of two days of congressional testimony that will subject the Fed's controversial bond-buying program to tough scrutiny and gauge his confidence in the resilience of the U.S. economy.

Coming just a week after the Fed's meeting minutes sent U.S. stocks reeling by suggesting the central bank could pull back its economic stimulus earlier than had been expected, and a day after another sharp stock market drop, investors are certain to hang on every word.

Beginning with the U.S. Senate Banking Committee on Tuesday, the scholarly Fed chief will be quizzed by some bitter critics of the aggressive steps he has championed to spur growth. On Wednesday, he will appear before the House Financial Services Committee.

"His opinion remains that there is still not enough growth, that high unemployment is a cyclical issue, that there is not enough inflation," economists at TD Securities in New York said in a note to clients. "He will keep the pedal to the metal deep into 2013."

The Fed chairman's prepared testimony is scheduled to be released at 10 a.m. (1500 GMT) on Tuesday, followed by a lengthy question-and-answer session. By tradition, he will issue the same statement on Wednesday before facing the House panel.

FIRST, DO NO HARM

Lawmakers in both chambers will seek his comment on the likely impact of $85 billion in across-the-board government spending cuts that are set to take effect on March 1.

Bernanke is likely to repeat his line that the indiscriminate axe they take to the budget will hurt the recovery, and argue that it would be better to cut the deficit over time and avoid the risk of a near-term fiscal shock.

Lawmakers will also question him about the Fed's bold bond- buying program, which has tripled the size of the central bank's balance sheet to $3 trillion since 2008.

The Fed, which cut overnight interest rates to near zero more than four years ago, is currently buying $85 billion a month in government and mortgage-backed bonds to keep longer- term borrowing costs low and spur the economy's recovery. The Fed has said it would continue to purchase bonds until it sees a substantial improvement in the outlook for the labor market.

That still appears a long way off. In January, the jobless rate ticked up a tenth of a percentage point to 7.9 percent.

Many Republicans have criticized the Fed's aggressive easing of monetary policy for risking inflation and asset bubbles, and for facilitating excessive government spending by keeping the nation's borrowing costs low.

Some of the same concerns have resonated within the central bank.

Minutes of the Fed's January 29-30 policy meeting, released last week, showed that a number of officials felt the potential risks posed by buying bonds could warrant tapering or ending the program before hiring picks up. However, several others argued there was a danger in halting it prematurely.

Financial markets are keen to find out where Bernanke stands. Expectations that he would offer reassuring words, coupled with fears that Europe's debt crisis could grow worse, led on Monday to the biggest drop in the yield on the benchmark 10-year U.S. Treasury note since November.

"You are probably going to hear a message that does not lean so heavily on the costs" of bond buying," said Michael Feroli, an economist with JPMorgan in New York.

(Reporting by Alister Bull; Editing by Tim Ahmann and Jan Paschal)

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AP source: Tom Brady gets 3-year extension

Tom Brady will be a Patriot until he is 40 years old.

Brady agreed to a three-year contract extension with New England on Monday, a person familiar with the contract told The Associated Press. The extension is worth about $27 million and will free up nearly $15 million in salary cap room for the team, which has several younger players it needs to re-sign or negotiate new deals with.

The person spoke on condition of anonymity because the extension has not been announced.

Sports Illustrated first reported the extension.

The 35-year-old two-time league MVP was signed through 2014, and has said he wants to play at least five more years.

A three-time Super Bowl champion, Brady will make far less in those three seasons than the going rate for star quarterbacks. Brady currently has a four-year, $72 million deal with $48 million guaranteed.

Drew Brees and Peyton Manning are the NFL's highest-paid quarterbacks, at an average of $20 million and $18 million a year, respectively.

Brady has made it clear he wants to finish his career with the Patriots, whom he led to Super Bowl wins for the 2001, 2003 and 2004 seasons, and losses in the big game after the 2007 and 2011 seasons. By taking less money in the extension and redoing his current contract, he's hopeful New England can surround him with the parts to win more titles.

Among the Patriots' free agents are top receiver Wes Welker and his backup, Julian Edelman; right tackle Sebastian Vollmer; cornerback Aqib Talib; and running back Danny Woodhead.

Brady has been the most successful quarterback of his era, of course, as well as one of the NFL's best leaders. His skill at running the no-huddle offense is unsurpassed, and he's easily adapted to the different offensive schemes New England has concentrated on through his 13 pro seasons.

The Patriots have gone from run-oriented in Brady's early days to a deep passing team with Randy Moss to an offense dominated by throws to tight ends, running backs and slot receivers.

Brady holds the NFL record for touchdown passes in a season with 50 in 2007, when the Patriots went 18-0 before losing the Super Bowl to the Giants. He has thrown for at least 28 touchdowns seven times and led the league three times.

Last season, Brady had 34 TD passes and eight interceptions as the Patriots went 12-4, leading the league with 557 points, 76 more than runner-up Denver.

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Chicago could see 6 inches of snow in Tuesday storm

Abundant sunshine and temperatures close to 50 degrees in the past few days teased sober Midwestern sensibilities.

Encouraged perhaps by spring training photos, some people deliberately ventured outside. Some even hopped on bicycles for spins. Maybe they dared to think that spring could break a little early this year.

But on Tuesday morning, for the second time in less than a week, a blustery mix of freezing rain, sleet and snow is forecast to hit the Chicago area. Accumulations could reach 6 inches.

Sure, weather predictions being what they are around here, many will shrug off the warnings and be brazenly optimistic. But it might be best to recall the adage that those who ignore history are sure to be victimized by it.

Chicago has plenty of late-season snow history and, regardless of what materializes, the prudent will keep their salt dry, snow shovels handy and snowblowers primed for the next couple of months.

National Weather Service records from 2011 show that 54 of the previous 139 years — nearly 40 percent — experienced at least one day with an inch or more of snowfall on or after March 25. A total of 17 of those years brought multiple days with more than an inch of snow to Chicago.

One year, 1926, included six days when more than an inch of snow fell after March 25.

And, like some cruel trick, the later in the season the snow falls, the heavier and deadlier it tends to be. On the other hand, it also generally melts faster.

Among the grimmest of those late snowfalls was the deadly storm of April 15-17, 1961, when a rainy low-pressure system stalled and kept looping over the Chicago region. It transformed cold rain into nearly 7 inches of snow. Six people died from the storm's effects; four were victims of snow-shoveling heart attacks.

That storm remains the latest major snowfall of 6 inches or more in the Chicago area.

More recently, the area was hit with nearly 2 inches of snow on March 27, 2008. On March 29, 2009, 1.2 inches accumulated. A week later, more than 2 inches of snow fell.

Tuesday's forecast, which calls for heavier snow north of Interstate 80 and winds whipping up to 35 mph, weighed on Jason Marker's mind while he stood at the Downers Grove Metra station Monday.

"I have a job interview tomorrow," said Marker, 30, of Downers Grove. "It's going to be tough getting there because I have to ride my bike."

Still, he said the winter has been a moderate one so far, "but maybe it will catch up with us tomorrow."

Ashley Feuillan and Bernard Thomas, also of Downers Grove, will be commuting in opposite directions Tuesday morning. Thomas commutes to a job in Aurora, which he starts at 7 a.m. Feuillan hops the train to Columbia College Chicago three times a week.

Both said they plan to leave earlier Tuesday.

"I actually like the snow," said Feuillan, 24, "but it can be a hassle when you're trying to get someplace."

Rather than focusing on what could be a nasty storm, Thomas, 40, kept an upbeat perspective.

"It hasn't been a bad winter," he said. "We haven't really had any big snowstorms."

If the forecast is accurate, Jake Weimer could receive a little relief.

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Italy faces post-vote stalemate, spooking investors

ROME (Reuters) - The Italian stock market fell and state borrowing costs rose on Tuesday as investors took fright at political deadlock after a stunning election that saw a protest party lead the poll and no group had a clear majority in parliament.

"The winner is: Ingovernability" ran the headline in Rome newspaper Il Messaggero, reflecting the stalemate the country would have to confront in the next few weeks as sworn enemies would be forced to work together to form a government.

In a sign of where that might lead, former prime minister Silvio Berlusconi indicated his center-right might be open to a grand coalition with the center-left bloc of Pier Luigi Bersani, which will have a majority in the lower house thanks to a premium of seats given to the largest bloc in the chamber.

Results in the upper house, the Senate, where seats are awarded on a region-by-region basis, indicated the center-left would end up with about 119 seats, compared with 117 for the center-right. But 158 are needed for a majority to govern.

Any coalition government that may be formed must have a working majority in both houses in order to pass legislation.

World financial markets reacted nervously to the prospect of a stalemate in the euro zone's third-largest economy with memories still fresh of the crisis that took the 17-member currency bloc to the brink of collapse in 2011.

The Milan bourse was down more than four percent at its opening and the spread between yields on 10-year Italian and German government bonds widened to 338.7 basis points, the highest since December 10. An ally of conservative German Chancellor Angela Merkel urged Italy to stick with reforms pursued by the outgoing technocratic emergency government of Mario Monti.

However, the poor showing by Prime Minister Monti's centrist bloc reflected a weariness with austerity that was exploited by both Berlusconi and comic Beppe Grillo; his anti-establishment 5-Star Movement won more votes than any other single party, taking 25 percent nationally. Bersani's allies helped his center-left bloc win the lower house by just 125,000 votes.

Berlusconi, a media magnate whose campaigning all but eroded Bersani's once commanding lead, said he was not worried about market reaction and played down the significance of the spread.

In a telephone call to a morning television show, he said: "Italy must be governed." He ruled out a deal with Monti but said he "must reflect" on a possible deal with the center left: "Every (political side) must be prepared to make sacrifices."

The euro skidded to an almost seven-week low against the dollar in Asia on fears about the euro zone's debt crisis. It fell as far as $1.3042, its lowest since January 10.

Another indication of investors' reaction to the results will come later on Tuesday when the Treasury auctions 8.75 billion euros in 6-month bonds.

Bersani claimed victory in the lower house and said it was obvious that Italy was in "a very delicate situation".

Grillo, however, showed no immediate willingness to negotiate. Commentators said all his adversaries underestimated the appeal of a grassroots movement that called itself a "non-party", particularly its allure among young Italians who find themselves without jobs and the prospect of a decent future.

"NON-PARTY" SURGES TO THE TOP

The 5-star Movement's score of 25.5 percent in the lower house was just ahead of the 25.4 percent for Bersani's Democratic Party, which ran in a coalition with the leftist SEL party, and it won almost 8.7 million votes overall - more than any other single party.

"The 'non-party' has become the largest party in the country," said Massimo Giannini, commentator for the Rome newspaper La Repubblica about Grillo, who mixes fierce attacks on corruption with policies ranging from clean energy to free Internet.

Grillo's surge in the final weeks of the campaign threw the race open, with hundreds of thousands turning up at his rallies to hear him lay into targets ranging from corrupt politicians and bankers to German Chancellor Angela Merkel.

In just three years, his 5-Star Movement, heavily backed by a frustrated generation of young Italians increasingly shut out from permanent full-time jobs, has grown from a marginal group to one of the most talked about political forces in Europe.

RECESSION

"It's a classic result. Typically Italian," said Roberta Federica, a 36-year-old office worker in Rome. "It means the country is not united. It is an expression of a country that does not work. I knew this would happen."

Italy's borrowing costs have come down in recent months, helped by the promise of European Central Bank support but the election result confirmed fears of many European countries that it would not produce a government strong enough to implement effective reforms.

A long recession and growing disillusionment with mainstream parties fed a bitter public mood that saw more than half of Italian voters back parties that rejected the austerity policies pursued by Monti with the backing of Italy's European partners.

Monti suffered a major setback. His centrist grouping won only 10.6 percent and two of his key centrist allies, Pier Ferdinando Casini and lower house speaker Gianfranco Fini, both of parliamentarians for decades, were booted out.

"It's not that surprising if you consider how much people were let down by politics in its traditional forms," Monti said.

Berlusconi's campaign, mixing sweeping tax cut pledges with relentless attacks on Monti and Merkel, echoed many of the themes pushed by Grillo and underlined the increasingly angry mood of the Italian electorate.

Stefano Zamagni, an economics professor at Bologna University said the result showed that a significant share of Italians "are fed up with following the austerity line of Germany and its northern allies".

"These people voted to stick one up to Merkel and austerity," he said.

Even if the next government turns away from the tax hikes and spending cuts brought in by Monti, it will struggle to revive an economy that has scarcely grown in two decades.

Monti was widely credited with tightening Italy's public finances and restoring its international credibility after the scandal-plagued Berlusconi, whom he replaced as the 2011 financial crisis threatened to spin out of control.

But he struggled to pass the kind of structural reforms needed to improve competitiveness and lay the foundations for a return to economic growth, and a weak center-left government may not find it any easier.

(Additional reporting by Barry Moody, Gavin Jones, Catherine Hornby, Lisa Jucca, Steven Jewkes, Steve Scherer and Naomi O'Leary; Writing by Philip Pullella and James Mackenzie; Editing by Pravin Char and Alastair Macdonald)

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