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

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

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

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

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

JAPAN SHARES KEEP RISING

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

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

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

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

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

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

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

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

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

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

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

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Syrian rebels take control of Damascus Palestinian camp

BEIRUT (Reuters) - Syrian rebels took full control of the Yarmouk Palestinian refugee camp on Monday after fighting raged for days in the district on the southern edge of President Bashar al-Assad's Damascus powerbase, rebel and Palestinian sources said.

The battle had pitted rebels, backed by some Palestinians, against Palestinian fighters of the pro-Assad Popular Front for the Liberation of Palestine-General Command (PFLP-GC). Many PFLP-GC fighters defected to the rebel side and their leader Ahmed Jibril left the camp two days ago, rebel sources said.

"All of the camp is under the control of the (rebel) Free Syrian Army," said a Palestinian activist in Yarmouk. He said clashes had stopped and the remaining PFLP fighters retreated to join Assad's forces massed on the northern edge of the camp.

The battle in Yarmouk is one of a series of conflicts on the southern fringes of Assad's capital, as rebels try to choke the power of the 47-year-old leader after a 21-month-old uprising in which 40,000 people have been killed.

Government forces have used jets and artillery to try to dislodge the fighters but the violence has crept into the heart of the city and activists say rebels overran three army stations in a new offensive in the central province of Hama on Monday.

On the border with Lebanon, hundreds of Palestinian families fled across the frontier following the weekend violence in Yarmouk, a Reuters witness said.

Syria hosts half a million Palestinian refugees, most living in Yarmouk, descendants of those admitted after the creation of Israel in 1948, and has always cast itself as a champion of the Palestinian struggle, sponsoring several guerrilla factions.

Both Assad's government and the mainly Sunni Muslim Syrian rebels have enlisted and armed divided Palestinian factions as the uprising has developed into a civil war.

"NEITHER SIDE CAN WIN"

Syrian Vice President Farouq al-Sharaa said in a newspaper interview published on Monday that neither Assad's forces nor rebels seeking to overthrow him can win the war.

Sharaa, a Sunni Muslim in a power structure dominated by Assad's Alawite minority, has rarely been seen since the revolt erupted in March 2011 and is not part of the president's inner circle directing the fight against Sunni rebels. But he is the most prominent figure to say in public that Assad will not win.

Sharaa said the situation in Syria was deteriorating and a "historic settlement" was needed to end the conflict, involving regional powers and the U.N. Security Council and the formation of a national unity government "with broad powers".

"With every passing day the political and military solutions are becoming more distant. We should be in a position defending the existence of Syria. We are not in a battle for an individual or a regime," Sharaa was quoted as telling Al-Akhbar newspaper.

"The opposition cannot decisively settle the battle and what the security forces and army units are doing will not achieve a decisive settlement," he said, adding that insurgents fighting to topple Syria's leadership could plunge it into "anarchy and an unending spiral of violence".

Sources close to the Syrian government say Sharaa had pushed for dialogue with the opposition and objected to the military response to an uprising that began peacefully.

In a veiled criticism of the crackdown, he said there was a difference between the state's duty to provide security to its citizens, and "pursuing a security solution to the crisis".

He said even Assad could not be certain where events in Syria were leading, but that anyone who met him would hear that "this is a long struggle...and he does not hide his desire to settle matters militarily to reach a final solution."

In Hama province, rebels and the army clashed in a new campaign launched on Sunday by rebels to block off the country's north, activists said.

The Syrian Observatory for Human Rights, an opposition-linked violence monitor, said fighting raged through the provincial towns of Karnaz, Kafar Weeta, Halfayeh and Mahardeh.

It said there were no clashes reported in Hama city, which lies on the main north-south highway connecting the capital with Aleppo, Syria's second city.

Qassem Saadeddine, a member of the newly established rebel military command, said on Sunday fighters had been ordered to surround and attack army positions across the province. He said Assad's forces were given 48 hours to surrender or be killed.

In 1982 Hafez al-Assad, father of the current ruler, crushed an uprising in Hama city, killing up to 30,000 civilians.

Qatiba al-Naasan, a rebel from Hama, said the offensive would bring retaliatory air strikes from the government but that the situation is "already getting miserable".

(Additional reporting by Oliver Holmes, Erika Solomon and Dominic Evans in Beirut, Afif Diab at Masnaa, Lebanon; editing by Philippa Fletcher)

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

TV Watch

The Voice

By Julia Haskins

12/17/2012 at 10:25 PM EST

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

Trae Patton/NBC

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

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

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

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

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

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

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Experts: No link between Asperger's, violence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

__

AP Writer Matt Apuzzo contributed to this report.

___

Online:

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

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Asian shares inch higher on "fiscal cliff" hopes

TOKYO (Reuters) - Asian shares crept higher on Tuesday, tracking the overnight gains in U.S. stocks, as fresh signs of compromise maintained a new optimism that the U.S. "fiscal cliff" budget tussle could be settled before tax hikes and spending cuts begin to bite early next year.

Oil and copper also firmed on the prospect of progress in the U.S. budget talks, but expectations of more monetary easing in Japan kept the yen soft.

President Barack Obama is seeking higher tax revenues which include increased rates on the wealthy while he is willing to cut some spending by changing the way cost of living adjustments are made to Social Security retirement benefits and other programs.

Obama's offer shows his willingness to give way on an item that some of his supporters had sought to protect, and may help advance negotiations with top Republican John Boehner to avert the fiscal cliff before the end-year deadline.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was up 0.2 percent, following a rise in global shares on Monday. The index snapped an eight-day winning streak on Monday as investors took profits from last week's rally.

Fears over the U.S. fiscal crisis have dragged on many markets, but regional equities took direction from local factors.

Australian shares <.axjo> led Asia's outperformers with a 0.7 percent gain, lifted by a rise in iron ore prices <.io62-cni> to a five-month high.

"Iron ore is a very key commodity in the Chinese industrial machine, steel usage will bounce back and that is good news for our exporters," said Baillieu Holst director Richard Morrow.

Seoul shares <.ks11> rose marginally but underperformed others in Asia, as investors were reluctant to build positions ahead of South Korea's presidential vote on Wednesday.

In Japan, the Nikkei average <.n225> surged 1.1 percent to an 8-1/2-month high and edged closer to the key 10,000-mark, with sentiment bolstered by a landslide election win for the conservative Liberal Democratic Party on Sunday. <.t/>

LDP leader Shinzo Abe, who is due to be confirmed as Japan's next premier on December 26, is calling for far more aggressive monetary stimulus and huge public works spending to rescue Japan out of decades-long deflation, pledges which are seen pressuring the yen and supporting Japanese stocks by improving earnings for Japanese exporters.

"The Nikkei is up today primarily due to the rise in U.S. stocks overnight, but the 'Abe-effect' is surprisingly longer-lasting as investors seem to be postponing the timing of unwinding their positions until they see the details and specifics in policies," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.

YEN REMAINs PRESSURED

The dollar inched up 0.1 percent to 83.95 yen, off a 20-month high of 84.48 yen hit on Monday but well above its late New York levels on Friday.

Abe applied fresh pressure on the Bank of Japan on Monday, saying that the election result reflected strong public support for his views, which he hoped the BOJ would take into account at its two-day policy meeting starting on Wednesday.

"The dollar has more upside against the yen ahead of the BOJ's meeting, with expectations for some additional easing steps being strengthened after Abe's comments yesterday," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

"The corrective fall in the dollar/yen after the election was small and it's crawling up because the yen weakening trend is still intact. But after the BOJ meeting, there will likely be pre-holiday profit-taking, pushing the dollar/yen down by 1 to 2 yen," he said, adding that the dollar could temporarily touch 85 yen before profit-taking sets in by the end of the year.

The benchmark 10-year Japanese government bond yield hit a one-month high of 0.750 percent on concerns that big-scale fiscal stimulus could seriously increase the country's debt burden.

U.S. Treasury yields also inched up in Asia, with the 10-year yields briefly reaching 1.796 percent, its highest level since October 26, on hopes for a deal on the U.S. fiscal cliff.

London copper was up 0.2 percent to $8,078.50 a metric ton (1.1023 tons).

U.S. crude rose 0.4 percent to $87.57 a barrel and Brent added 0.5 percent to $108.18.

(Additional reporting by Victoria Thieberger in Melbourne; Editing by Eric Meijer)

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U.N. chief alarmed by escalating violence in Syria

UNITED NATIONS (Reuters) - U.N. Secretary-General Ban Ki-moon expressed alarm on Sunday at the worsening violence in Syria, including the reported mass killing of Alawites and alleged firing of long-range missiles on Syrian territory, Ban's spokesman said.

"The Secretary-General is alarmed by the continued dramatic escalation of violence in Syria over the past several days, and the grave danger facing civilians in areas under fire," Ban's spokesman, Martin Nesirky, said in a statement.

"There have been extremely worrisome reports earlier this week of a mass killing of civilians in the village of Aqrab near Hama, as well as alleged firing of long-range missiles in some areas of the country," he said.

In the Aqrab incident, up to 200 members of President Bashar al-Assad's Alawite minority were injured or killed in an attack on their village in central Syria on Tuesday, opposition activists said. The death toll was still not known.

There have also been reports of the Syrian government using Scud missiles. NATO's U.S. commander said on Friday the alliance was deploying the Patriot anti-missile system along Syria's northern frontier because Assad's forces had fired Scud missiles that landed near Turkish territory.

Nesirky said that "continued bombing raids by fixed-wing military aircrafts and attack helicopters on populated areas have been amply documented."

"Today's reports of aerial bombing amid intense violence resulting in many casualties among the Palestinian refugee population in the Yarmouk camp in Damascus are a matter of grave concern," he said.

Activists said fighter jets had bombed the Yarmouk camp, killing at least 25 people sheltering in a mosque.

Nesirky said Ban "calls on all sides to cease all forms of violence. The Secretary-General reminds all parties in Syria that they must abide by their obligations under international humanitarian law to protect civilians."

"Targeting civilians or carrying out military operations in populated areas, in an indiscriminate or disproportionate fashion that harms civilians is a war crime," he added.

Syrian Vice President Farouq al-Sharaa told a Lebanese newspaper that neither forces of President Bashar al-Assad nor rebels can win the war in Syria. That is a view a number of U.N. officials and diplomats have voiced privately to Reuters.

The U.N. Security Council has been incapable of taking any meaningful action in the conflict. Veto powers Russia and China refuse to condemn Assad or support sanctions. Assad's government accuses Saudi Arabia, Qatar, Turkey, the United States and other Western governments of supporting and arming the rebels, an allegation the governments deny.

Meanwhile, U.N.-Arab League envoy Lakhdar Brahimi has failed to bridge the gaps between the Russian and U.S. positions on Syria, which U.N. diplomats say is at the heart of the longstanding deadlock on the Security Council.

Nesirky said Ban "reiterates his call on the international community to make every effort to stop the tragic spiral of violence in Syria and urgently to promote an inclusive political process leading to a peaceful political transition."

(Reporting By Louis Charbonneau; Editing by Sandra Maler)

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Top 5 Apps for Kids This Week

1. PHLIP

Ages 4-up Overall rating: 4.1 out of 5 stars Why we like it: PHLIP is a spatial relations puzzle where you “flip” or turn your screen left or right, like a steering wheel, to change the orientation of the set of tiles, in order to reassemble the picture. You can use photos you take, or choose one from your photo library. Need to know: The more tiles, the harder the puzzle. You can lock any tile by tapping on it. The physical rotation of the device develops motor and cognitive skills and hand-eye coordination. It can also cause your heavy iPad to slip out of your hands. This is a game that works much better on an iPad Mini. Ease of use: 8/10 Educational: 9/10 Entertaining: 7/10 $ 0.99

Click here to view this gallery.

[More from Mashable: How to Crowdsource Your Job Hunt]

Chris Crowell is a veteran kindergarten teacher and contributing editor to Children’s Technology Review, a web-based archive of articles and reviews on apps, technology toys and video games. Download a free issue of CTR here.

In this week’s Top 5 Kids Apps, your kids can play with a spatial puzzle that lets them reassemble photographs they upload themselves. There’s also a chance to learn and have fun with geography trivia and explore Australia with an illustrated story.

[More from Mashable: 4 Benefits of a Job Search Community]

Our friends at Children’s Technology Review shared with us these 5 top apps from their comprehensive monthly database of kid-tested reviews. The site covers everything from math and counting to reading and phonics.

Check back next week for more Top Kids Apps from Children’s Technology Review

Photo via iStockPhoto, cglade

This story originally published on Mashable here.

Gadgets News Headlines – Yahoo! News

Title Post: Top 5 Apps for Kids This Week
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based on 99998 ratings.
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Drew Barrymore's Baby & Miley Cyrus's Outfit Get Readers' Top Reactions

By Julia Haskins

12/16/2012 at 09:30 PM EST

Drew Barrymore and Olive. Miley Cyrus

Michael Tran/Filmmagic

We love knowing what's on your mind when you read articles on PEOPLE.com, and as always, you gave us plenty of great feedback this week.

Your emotions ranged from "aww" at the photos of Drew Barrymore's daughter Olive, to "ugh" when it came to Miley Cyrus's questionable outfit choice. You also mourned the loss of a legend, singer Jenni Rivera.

Keep letting us know what's making you smile, frown, or LOL each week by clicking on the buttons at the bottom of every article.

You were nearly as thrilled to welcome Drew Barrymore's baby as the proud mom herself! The actress is over the moon about her new daughter Olive, and describes her feelings for her little as "like the biggest crush I've ever had in my life!"

You were highly impressed by professional builder Johan Huibers's latest creation: A full-scale replica of Noah's Ark. The wooden vessel – which is 427 feet long, 95 feet wide and 75 feet high – is a feat of, well, biblical proportions!

You were heartbroken over the news that Mexican-American singer Jenni Rivera was killed in a plane crash shortly after takeoff early Sunday. Rivera, who was known as the Diva of Banda and sold over 20 million albums worldwide, was 43. Her family is also mourning the tragic loss.

Miley Cyrus didn't leave much to the imagination with a revealing outfit worn on stage at a concert in Hollywood. Readers were angry about the young starlet's ensemble, which consisted of tight pants, knee-high snakeskin boots and a peekaboo top that showed more than just a little cleavage.

Well, this is awkward. You weren't too upset about Track Palin filing for divorce from wife Britta Hanson after a year and a half. Their parting made readers LOL. Palin, the oldest son of former Alaska governor Sarah Palin, and Hanson were former high school sweethearts.

Check back next week for another must-read roundup, and see what readers are reacting to every day here.

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Experts: No link between Asperger's, violence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

__

AP Writer Matt Apuzzo contributed to this report.

___

Online:

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

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Wall Street Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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