Egypt panel implicates Mubarak, military in deaths

CAIRO (AP) — An Egyptian fact-finding mission determined that Hosni Mubarak watched the uprising against him unfold through a live TV feed at his palace, despite his later denial that he knew the extent of the protests and crackdown against them, a member of the mission said Wednesday.
The mission's findings increase pressure for a retrial of the 84-year old ousted president, who is already serving a life sentence for the deaths of 900 protesters. But its report could hold both political gains and dangers for his successor, Mohammed Morsi. A new prosecution of Mubarak would be popular, since many Egyptians were angered that he was convicted only for failing to stop the killing of protesters, rather than for ordering the crackdown.
But the report also implicates the military and security officials in protester deaths. Any move to prosecute them could spark a backlash from powerful generals and others who still hold positions under Morsi's government.
Rights activists said they would watch carefully how aggressively Morsi pursues the evidence, detailed by a fact-finding mission he commissioned.
"This report should be part of the democratic transformation of Egypt and restructuring of security agencies," Ahmed Ragheb, a member of the commission and a rights lawyer, told The Associated Press. "At the end of the day, there will be no national reconciliation without revealing the truth, and ensuring accountability."
Morsi, an Islamist from the Muslim Brotherhood, asked the commission to send the report to the chief prosecutor Talaat Abdullah to investigate new evidence, his office said Wednesday.
Morsi recently appointed Abdullah to replace a Mubarak holdover who many considered an obstacle to strongly prosecuting former regime officials. Some judges criticized the appointment as a political move to continue to wield leverage over the prosecutor post.
The case will be a test whether Abdullah will conduct a thorough process of holding officials responsible. Some rights activists were already disappointed that Morsi didn't empower the fact-finding commission itself to turn the investigations into prosecutions and avoid political influence.
The 700-page report on protester deaths the past two years was submitted Wednesday to Morsi by the commission, made up of judges, rights lawyers, and representatives from the Interior Ministry and the intelligence, as well as families of victims.
Morsi formed the commission soon after coming to office in June as Egypt's first freely elected president after campaign promises to order retrials of former regime figures if new evidence was revealed.
The trial of Mubarak and other figures from his regime left the public deeply unconvinced justice was done. The prosecution was limited in scope, focusing only on the first few days of the 18-day uprising and on two narrow corruption cases. Lawyers have since criticized the case as shoddy, based mainly on evidence collected by battered and widely hated police in the days following the uprising.
In the verdicts last summer, Mubarak and his two sons were acquitted on corruption charges. His former interior minister was convicted and sentenced to life in prison for complicity in the crackdown, while six top security aides were acquitted for lack of evidence.
Mubarak was convicted to a life sentence of failing to prevent the deaths of protesters during the uprising, which ended with his fall on Feb. 11, 2011. Many Egyptians believed he should have been held responsible for ordering the killings, in addition to widespread corruption, police abuse and political wrongdoing under his regime.
One key new finding by the commission was that Mubarak closely monitored the crackdown.
Ragheb said state TV had designated an encrypted satellite TV station that fed live material from cameras installed in and around Tahrir Square directly to Mubarak's palace throughout clashes between protesters and security forces.
"Mubarak knew of all the crimes that took place directly. The images were carried to him live, and he didn't even need security reports," said Ragheb. "This entails a legal responsibility" in the violence against the protesters, including the infamous Camel Battle, where men on horses and camel and other Mubarak supporters stormed Tahrir.
At least 11 people are said to have been killed in that attack, and some 25 former ruling party members tried in the case were acquitted.
In questioning for his trial, Mubarak said he was kept in the dark by top aides as to the gravity of the situation, and fended off charges that he ordered or knew of the deadly force.
Khaled Abu Bakr, another lawyer who represented some of the victims in the uprising, said a retrial could "add more jail time if new charges appeared, and it could also change the penalty from life sentence to the death penalty."
More politically explosive is the commission's look at the 17 months of military rule after Mubarak's fall, when activists protesting the generals' conduct of the transition clashed repeated with security forces in violence that killed at least 100 protesters.
The report clearly established that security officials and the military used live ammunition against protesters during the transition and the anti-Mubarak uprising, Ragheb said.
The military repeatedly denied firing live ammunition, despite several protesters killed by bullets and pellets and despite reports by rights groups holding the army responsible.
The report established that at least one of nearly 70 missing since the uprising was tortured and died in a military prison, said Ragheb. It also details abuse by military and security officers in the days following Mubarak's ouster, including the beating and abusing of women protesters and the conducting of "virginity tests" to intimidate and humiliate them.
Ragheb refused to give further specifics. The report was not made public. But he told Al-Masry Al-Youm daily thatit recommends summoning hundreds for questioning in protester killings.
Several rights activists raised concerns that findings implicating any military officials or security figures in the current Interior Ministry will be ignored.
"There is every reason for Morsi and the prosecutor general he appointed to act on the findings and make sure they are translated into prompt prosecution," said Hossam Bahgat, a human rights lawyer from the Egyptian Initiative for Personal Rights.
"It will be a major embarrassment not to do anything," he said, adding that it would also be "clear evidence" of what many believe to be an agreement by Morsi to grant immunity to military leaders for any alleged crimes during their rule.
Morsi appointed the latest commission at a time when his relations with the generals were rough. Just before officially transferring rule to Morsi, the military had issued a decree stripping the presidency of most of its powers.
After barely a month in office, Morsi pushed out the top generals who ruled during the transition and reclaimed his powers. His move brought no protest from the military, which many took as a sign of a backroom deal.
Gamal Eid, a lawyer who has represented protester families, pointed out that prosecutors and the court ignored a previous fact-finding mission that established evidence that could have been more incriminating.
Heba Morayef, a researcher with Human Rights Watch in Egypt, said a "protect the revolution" law recently issued by Morsi providing for new investigations into protester killings made no mention of the commission, meaning its findings were not binding and could be ignored.
"It is a wasted opportunity," she said. "Without a clear implementing mechanism, you leave room for political compromise at the expense of accountability.

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Venezuela opposition: Chavez secrecy feeds rumors

CARACAS, Venezuela (AP) — Venezuela's opposition demanded that the government reveal specifics of President Hugo Chavez's condition Wednesday, criticizing secrecy surrounding the ailing leader's health more than three weeks after his cancer surgery in Cuba.
Opposition coalition leader Ramon Guillermo Aveledo said at a news conference that the information provided by government officials "continues to be insufficient."
Chavez has not been seen or heard from since the Dec. 11 operation, and Vice President Nicolas Maduro on Tuesday said the president's condition remained "delicate" due to complications from a respiratory infection.
Maduro also urged Venezuelans to ignore rumors about Chavez's condition.
Aveledo said the opposition has been respectful during Chavez's illness, arguing that "the secrecy is the source of the rumors."
"They should tell the truth," Aveledo said, noting that Maduro had pledged to provide full reports about Chavez's condition. He reiterated the opposition's call for the government to release a medical report and said all indications are that Chavez won't be able to be sworn in to begin a new term Jan. 10.
If Chavez can't take office on that date, Aveledo said the constitution is clear that the National Assembly president should then take over temporarily until a new election is held. He said what happens next in Venezuela should be guided by "the truth and the constitution."
If Chavez dies or is unable to continue in office, the Venezuelan Constitution says a new election should be held within 30 days.
With rumors swirling that Chavez had taken a turn for the worse, Maduro said on Tuesday that he had met with the president twice, had spoken with him and would return to Caracas on Wednesday.
"He's totally conscious of the complexity of his post-operative state and he expressly asked us ... to keep the nation informed always, always with the truth, as hard as it may be in certain circumstances," Maduro said in the prerecorded interview in Havana, which was broadcast Tuesday night by the Caracas-based television network Telesur.
Both supporters and opponents of Chavez have been on edge in the past week amid shifting signals from the government about the president's health. Officials have reported a series of ups and downs in his recovery — the most recent, on Sunday, announcing that he faced the new complications from a respiratory infection.
Maduro did not provide any new details about Chavez's complications during Tuesday's interview. But he joined other Chavez allies in urging Venezuelans to ignore gossip, saying rumors were being spread due to "the hatred of the enemies of Venezuela."
He didn't refer to any rumors in particular, though one circulating online had described Chavez as being in a coma.
Maduro said Chavez faces "a complex and delicate situation." But Maduro also said that when he talked with the president and looked at his face, he seemed to have "the same strength as always."
"All the time we've been hoping for his positive evolution. Sometimes he has had light improvements, sometimes stationary situations," he said.
Maduro's remarks about the president came at the end of an interview in which he praised Cuba's government effusively and touched on what he called the long-term strength of Chavez's socialist Bolivarian Revolution movement. He mentioned that former Cuban President Fidel Castro had visited the hospital where Chavez was treated.
In Washington, the U.S. State Department said procedures under the Venezuelan Constitution should be followed if Chavez is no longer able to carry out his duties as president.
"We want to see any transition take place in a manner that is consistent with the Venezuelan Constitution, that any election be fully transparent, democratic, free and fair," State Department spokeswoman Victoria Nuland told reporters on Wednesday.
Asked if Chavez being out of the picture would make it easier to improve long-strained ties between Venezuela and the U.S., Nuland said, "Obviously we will judge our ability to improve our relationship with Venezuela based on steps they are able to take."
The U.S. Embassy in Caracas has been without an ambassador since July 2010. Chavez rejected the U.S. nominee for ambassador, accusing him of making disrespectful remarks about Venezuela's government. That led Washington to revoke the visa of the Venezuelan ambassador.
But recently U.S. and Venezuelan diplomats began high-level conversations aimed at improving relations, a U.S. government official said. The official spoke on condition of anonymity because he wasn't authorized to speak publicly about the matter.
The official confirmed recent reports that Roberta Jacobson, assistant secretary of state for Western Hemisphere affairs, spoke by telephone with Maduro in November and discussed ways of improving relations. He also confirmed that U.S. diplomat Kevin Whitaker had a subsequent conversation with Roy Chaderton, Venezuela's ambassador to the Organization of American States.
Venezuelan diplomats could not be reached to comment about those recent contacts with U.S. officials.
In Bolivia, meanwhile, President Evo Morales said he is concerned about his friend and ally.
"I hope we can see him soon," Morales said at a news conference Wednesday. "But it's a very worrying situation."
"I've tried to make contact with the vice president, and it's been difficult. I hope all of their aims are achieved to save President Chavez's life."
Before his operation, Chavez acknowledged he faced risks and designated Maduro as his successor, telling supporters they should vote for the vice president if a new presidential election was necessary.
Maduro didn't discuss the upcoming inauguration plans, saying only that he is hopeful Chavez will improve.
"Someone asked me yesterday by text message: How is the president? And I said, 'With giant strength,'" Maduro said. He recalled taking Chavez by the hand: "He squeezed me with gigantic strength as we talked.

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U.N. lifts Syria death toll to "truly shocking" 60,000

AMMAN/GENEVA (Reuters) - More than 60,000 people have died in Syria's uprising and civil war, the United Nations said on Wednesday, dramatically raising the death toll in a struggle that shows no sign of ending.
In the latest violence, dozens were killed in a rebellious Damascus suburb when a government air strike turned a petrol station into an inferno, incinerating drivers who had rushed there for a rare chance to fill their tanks, activists said.
"I counted at least 30 bodies. They were either burnt or dismembered," said Abu Saeed, an activist who arrived in the area an hour after the 1 p.m. (1100 GMT) raid in Muleiha, a suburb on the eastern edge of the capital.
In the north, rebels launched a major attack to take a military airport, and said they had succeeded in destroying a fighter plane and a helicopter on the ground.
U.N. Human Rights Commissioner Navi Pillay said in Geneva that researchers cross-referencing seven sources over five months of analysis had listed 59,648 people killed in Syria between March 15, 2011 and November 30, 2012.
"The number of casualties is much higher than we expected and is truly shocking," she said. "Given that there has been no let-up in the conflict since the end of November, we can assume that more than 60,000 people have been killed by the beginning of 2013."
There was no breakdown by ethnicity or information about whether the dead were rebels, soldiers or civilians. There was also no estimate of an upper limit of the possible toll.
Previously, the opposition-linked Syrian Observatory for Human Rights monitoring group had put the toll at around 45,000 confirmed dead but said the real number was likely to be higher.
FATAL RUSH FOR PETROL
Video footage taken by activists at the scene of the air strike on the petrol station showed the body of a man in a helmet still perched on a motorcycle amid flames engulfing the scene. Another man was shown carrying a dismembered body.
The video could not be verified. The government bars access to the Damascus area to most international media.
The activists said rockets were fired from a nearby government air base at the petrol station and a residential area after the air raid.
"Until the raid, Muleiha was quiet. We have been without petrol for four days and people from the town and the countryside rushed to the station when a state consignment came in," Abu Fouad, another activist at the scene, said by phone.
President Bashar al-Assad's forces also fired artillery and mortars at the capital's rebellious districts of Douma, Irbin and Zamlaka, activists living there said.
After nightfall there was shelling in the Jobar and Assali districts, and fighting occurred in the northern suburb of Harasta, on the highway leading north, Syria's main artery.
Assad's forces control the centre of the capital, while rebels and their sympathizers hold a ring of southern and eastern suburbs that are often hit from the air.
The Observatory said a separate air strike killed 12 members of a family, most of them children, in Moadamiyeh, a southwestern district near the centre of Damascus where rebels have fought for a foothold.
The rebels hold wide swathes of the north and east of the country, but have been unable to protect the areas they control from Assad's air power. Their main targets in recent months have been air bases, with a goal of preventing the government from using its jets and helicopters.
The rebels launched a major attack on Wednesday on Taftanaz, a northern air base which they hope to seize. A statement by the northern rebel Idlib Coordination Committee said they had battled their way to the airport's main command building but were not yet in control of the site.
The statement said the rebels had detonated a car bomb inside the Taftanaz airport grounds and destroyed a helicopter.
A rebel speaking from near the airport told Reuters the base's main sections were still in loyalist hands but rebels had destroyed a fighter jet as well as the helicopter.
The family of an American freelance journalist, James Foley, 39, said on Wednesday he had been missing in Syria since being kidnapped six weeks ago by gunmen. No group has publicly claimed responsibility for his abduction.
Syria was by far the most dangerous country for journalists in 2012, with 28 killed there.
The conflict began in March 2011 with peaceful protests against four decades of Assad family rule and turned into an armed revolt after months of government repression.
"FOR GOD'S EYES"
Both sides have been accused of committing atrocities in the 21-month-old conflict, but the United Nations says the government and its allies have been more culpable.
In the latest evidence of atrocities, Internet video posted by Syrian rebels shows armed men, apparently fighters loyal to Assad, stabbing two men to death and stoning them with concrete blocks in a summary execution lasting several minutes.
Reuters could not verify the provenance of the footage or the identity of the perpetrators and their victims. The video was posted on Tuesday but it was not clear where or when it was filmed. However it does clearly show a summary execution and torture, apparently being carried out by government supporters.
At one point, one of the assailants says: "For God's eyes and your Lord, O Bashar," an Arabic incantation suggesting actions being carried out in the leader's name.
The video was posted on YouTube by the media office of the Damascus-based rebel First Brigade, which said it had been taken from a captured member of the shabbiha pro-government militia.
The perpetrators show off for the camera, smiling for close-up shots, slicing at the victims' backs, then stabbing them and bashing them with large slabs of masonry.
Syria's civil war is the longest and deadliest conflict to emerge from uprisings that began sweeping the Arab world in 2011 and has developed a significant sectarian element.
Rebels, mostly from the Sunni Muslim majority, confront Assad's army and security forces, dominated by his Shi'ite-derived Alawite sect, which, along with some other minorities, fears revenge if he falls.

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Oil down slightly as fiscal-cliff talks continue

The price of oil fell slightly Friday, as the stock market drifted lower and efforts continued in Washington to strike a budget deal before the year-end deadline.
U.S. benchmark crude fell 7 cents to finish at $90.80 a barrel.
Hopes that a budget compromise might be reached were still alive as congressional leaders met with President Barack Obama at the White House. The Republican-dominated House is set to meet Sunday and stay in session until Jan. 2, the day before the new Congress is sworn in. Without a budget deal, automatic tax hikes and government spending cuts could send the economy into recession, economists say.
Traders are also weighing rising energy supplies.
Phil Flynn, of the Price Futures Group, said that a government report Friday showed U.S. oil production hit its highest point since March of 1993, at nearly 7 million barrels per day.
The Energy Department's Energy Information Administration said that U.S. crude supplies fell by 600,000 barrels last week but were still 13 percent above year-ago levels. Analysts expected a drop of 2 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos. Supplies at the crude delivery hub in Cushing, Okla., rose to an all-time high of 49.2 million barrels, more than 20 million barrels above year-ago levels.
Gasoline supplies increased by 3.8 million barrels, well above the 250,000-barrel increase that analysts forecast. Demand for gasoline at the wholesale level is nearly 3 percent lower than a year ago.
Flynn also said traders were looking beyond the fiscal cliff to supply changes in the new year. Next month the pipeline flow between Cushing and Texas will increase. That means more buyers can access that oil, so Flynn expects higher prices for crude. And with much of the nation facing its real first cold snap of the winter — with the coldest temperatures in two years — Flynn said many traders expect more demand for petroleum products.
In other energy futures trading on the Nymex:
— Wholesale gasoline fell 2 cents to end at $2.80 a gallon.
— Heating oil fell 3 cents to finish at $3.04 a gallon.
— Natural gas rose 6 cents to end at $3.47 per 1,000 cubic feet.
In London, Brent crude, used to price various kinds of foreign oil, fell 18 cents to finish at $110.62 a barrel on the ICE Futures exchange.

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Stocks drop as hope for a budget deal slips away

 Stocks are dropping again on Wall Street as investors lose hope that Washington will meet a self-imposed deadline for reaching a budget deal by year-end.
The five-day losing streak for the Dow Jones industrial average was the longest since July.
The Dow lost 158 points to close at 12,938 Friday.
The Standard & Poor 500 index fell 15 points to 1,402 and the Nasdaq dropped 25 points to 2,960.
The market was down all day. The losses accelerated in the final 20 minutes of trading as reports circulated that President Barack Obama would not make a new budget proposal in a meeting with congressional leaders.
Two stocks fell for every one that rose on the New York Stock Exchange. Volume was lower than the recent average at 2.4 billion shares.

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Wall Street ends sour week with 5th straight decline

- Stocks fell for a fifth straight day on Friday, dropping 1 percent and marking the S&P 500's longest losing streak in three months as the federal government edged closer to the "fiscal cliff" with no solution in sight.
President Barack Obama and top congressional leaders met at the White House to work on a solution for the draconian debt-reduction measures set to take effect beginning next week. Stocks, which have been influenced by little else than the flood of fiscal cliff headlines from Washington in recent days, extended losses going into the close with the Dow Jones industrial average and the S&P 500 each losing 1 percent, after reports that Obama would not offer a new plan to Republicans. The Dow closed below 13,000 for the first time since December 4.
"I was stunned Obama didn't have another plan, and that's absolutely why we sold off," said Mike Shea, managing partner at Direct Access Partners LLC in New York. "He's going to force the House to come to him with something different. I think that's a surprise. The entire market is disappointed in a lack of leadership in Washington."
In a sign of investor anxiety, the CBOE Volatility Index <.vix>, known as the VIX, jumped 16.69 percent to 22.72, closing at its highest level since June. Wall Street's favorite fear barometer has risen for five straight weeks, surging more than 40 percent over that time.
The Dow Jones industrial average <.dji> dropped 158.20 points, or 1.21 percent, to 12,938.11 at the close. The Standard & Poor's 500 Index <.spx> lost 15.67 points, or 1.11 percent, to 1,402.43. The Nasdaq Composite Index <.ixic> fell 25.59 points, or 0.86 percent, to end at 2,960.31.
For the week, the Dow fell 1.9 percent. The S&P 500 also lost 1.9 percent for the week, marking its worst weekly performance since mid-November. The Nasdaq finished the week down 2 percent. In contrast, the VIX jumped 22 percent for the week.
Pessimism continued after the market closed, with stock futures indicating even steeper losses. S&P 500 futures dropped 26.7 points, or 1.9 percent, eclipsing the decline seen in the regular session.
All 10 S&P 500 sectors fell during Friday's regular trading, with most posting declines of 1 percent, but energy and material shares were among the weakest of the day, with both groups closely tied to the pace of growth.
An S&P energy sector index <.gspe> slid 1.8 percent, with Exxon Mobil down 2 percent at $85.10, and Chevron Corp off 1.9 percent at $106.45. The S&P material sector index <.gspm> fell 1.3 percent, with U.S. Steel Corp down 2.6 percent at $23.03.
Decliners outnumbered advancers by a ratio of slightly more than 2 to 1 on the New York Stock Exchange, while on the Nasdaq, two stocks fell for every one that rose.
"We've been whipsawing around on low volume and rumors that come out on the cliff," said Eric Green, senior portfolio manager at Penn Capital Management in Philadelphia, who helps oversee $7 billion in assets.
With time running short, lawmakers may opt to allow the higher taxes and across-the-board federal spending cuts to go into effect and attempt to pass a retroactive fix soon after the new year. Standard & Poor's said an impasse on the cliff wouldn't affect the sovereign credit rating of the United States.
"We're not as concerned with January 1 as the market seems to be," said Richard Weiss, senior money manager at American Century Investments, in Mountain View, California. "Things will be resolved, just maybe not on a good timetable, and any deal can easily be retroactive."
Trading volume was light throughout the holiday-shortened week, with just 4.46 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT on Friday, below the daily average so far this year of about 6.48 billion shares. On Monday, the U.S. stock market closed early for Christmas Eve, and the market was shut on Tuesday for Christmas. Many senior traders were absent this week for the holidays.
Highlighting Wall Street's sensitivity to developments in Washington, stocks tumbled more than 1 percent on Thursday after Senate Majority Leader Harry Reid warned that a deal was unlikely before the deadline. But late in the day, stocks nearly bounced back when the House said it would hold an unusual Sunday session to work on a fiscal solution.
Positive economic data failed to alter the market's mood.
The National Association of Realtors said contracts to buy previously owned U.S. homes rose in November to their highest level in 2-1/2 years, while a report from the Institute for Supply Management-Chicago showed business activity in the U.S. Midwest expanded in December.
"Economic reports have been very favorable, and once Congress comes to a resolution, the market should resume an upward trend, based on the data," said Weiss, who helps oversee about $125 billion in assets. "All else being equal, we see any further decline as a buying opportunity."
Barnes & Noble Inc rose 4.3 percent to $14.97 after the top U.S. bookstore chain said British publisher Pearson Plc had agreed to make a strategic investment in its Nook Media subsidiary. But Barnes & Noble also said its Nook business will not meet its previous projection for fiscal year 2013.
Shares of magicJack VocalTec Ltd jumped 10.3 percent to $17.95 after the company gave a strong fourth-quarter outlook and named Gerald Vento president and chief executive, effective January 1.
The U.S.-listed shares of Canadian drugmaker Aeterna Zentaris Inc surged 13.8 percent to $2.47 after the company said it had reached an agreement with the U.S. Food and Drug Administration on a special protocol assessment by the FDA for a Phase 3 registration trial in endometrial cancer with AEZS-108 treatment.

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Wall St Week Ahead - Cliff may be a fear, but debt ceiling much scarier

 Investors fearing a stock market plunge - if the United States tumbles off the "fiscal cliff" next week - may want to relax.
But they should be scared if a few weeks later, Washington fails to reach a deal to increase the nation's debt ceiling because that raises the threat of a default, another credit downgrade and a panic in the financial markets.
Market strategists say that while falling off the cliff for any lengthy period - which would lead to automatic tax hikes and stiff cuts in government spending - would badly hurt both consumer and business confidence, it would take some time for the U.S. economy to slide into recession. In the meantime, there would be plenty of chances for lawmakers to make amends by reversing some of the effects.
That has been reflected in a U.S. stock market that has still not shown signs of melting down. Instead, it has drifted lower and become more volatile.
In some ways, that has let Washington off the hook. In the past, a plunge in stock prices forced the hand of Congress, such as in the middle of the financial crisis in 2008.
"If this thing continues for a bit longer and the result is you get a U.S. debt downgrade ... the risk is not that you lose two-and-a-half percent, the risk is that you lose ten and a half," said Jonathan Golub, chief U.S. equity strategist at UBS Equity Research, in New York.
U.S. Treasury Secretary Tim Geithner said this week that the United States will technically reach its debt limit at the end of the year.
INVESTORS WARY OF JANUARY
The White House has said it will not negotiate the debt ceiling as in 2011, when the fight over what was once a procedural matter preceded the first-ever downgrade of the U.S. credit rating. But it may be forced into such a battle again. A repeat of that war is most worrisome for markets.
Markets posted several days of sharp losses in the period surrounding the debt ceiling fight in 2011. Even after a bill to increase the ceiling passed, stocks plunged in what was seen as a vote of "no confidence" in Washington's ability to function, considering how close lawmakers came to a default.
Credit ratings agency Standard & Poor's lowered the U.S. sovereign rating to double-A-plus, citing Washington's legislative problems as one reason for the downgrade from triple-A status. The benchmark S&P 500 dropped 16 percent in a four-week period ending August 21, 2011.
"I think there will be a tremendous fight between Democrats and Republicans about the debt ceiling," said Jon Najarian, a co-founder of online brokerage TradeMonster.com, in Chicago.
"I think that is the biggest risk to the downside in January for the market and the U.S. economy."
There are some signs in the options market that investors are starting to eye the January period with more wariness. The CBOE Volatility Index <.vix>, or the VIX, the market's preferred indicator of anxiety, has remained at relatively low levels throughout this process, though on Thursday it edged above 20 for the first time since July.
More notable is the action in VIX futures markets, which shows a sharper increase in expected volatility in January than in later-dated contracts. January VIX futures are up nearly 23 percent in the last seven trading days, compared with a 13 percent increase in March futures and an 8 percent increase in May futures. That's a sign of increasing near-term worry among market participants.
The CBOE Volatility Index closed on Friday at 22.72, gaining nearly 17 percent to end at its highest level since June as details emerged of a meeting on Friday afternoon of President Barack Obama with Senate and House leaders from both parties where the president offered proposals similar to those already rejected by Republicans. Stocks slid in late trading and equity futures continued that slide after cash markets closed.
"I was stunned Obama didn't have another plan, and that's absolutely why we sold off," said Mike Shea, a managing partner and trader at Direct Access Partners LLC, in New York.
Obama offered hope for a last-minute agreement to avoid the fiscal cliff after a meeting with congressional leaders, although he scolded Congress for leaving the problem unresolved until the 11th hour.
"The hour for immediate action is here," he told reporters at a White House briefing. "I'm modestly optimistic that an agreement can be achieved."
The U.S. House of Representatives is set to convene on Sunday and continue working through the New Year's Day holiday. Obama has proposed maintaining current tax rates for all but the highest earners.
Consumers don't appear at all traumatized by the fiscal cliff talks, as yet. Helping to bolster consumer confidence has been a continued recovery in the housing market and growth in the labor market, albeit slow.
The latest take on employment will be out next Friday, when the U.S. Labor Department's non-farm payrolls report is expected to show jobs growth of 145,000 for December, in line with recent growth.
Consumers will see their paychecks affected if lawmakers cannot broker a deal and tax rates rise, but the effect on spending is likely to be gradual.
PLAYING DEFENSE
Options strategists have noted an increase in positions to guard against weakness in defense stocks such as General Dynamics because those stocks would be affected by spending cuts set for that sector. Notably, though, the PHLX Defense Index is less than 1 percent away from an all-time high reached on December 20.
This underscores the view taken by most investors and strategists: One way or another, Washington will come to an agreement to offset some effects of the cliff. The result will not be entirely satisfying, but it will be enough to satisfy investors.
"Expectations are pretty low at this point, and yet the equity market hasn't reacted," said Carmine Grigoli, chief U.S. investment strategist at Mizuho Securities USA, in New York. "You're not going to see the markets react to anything with more than a 5 (percent) to 7 percent correction."
Save for a brief 3.6 percent drop in equity futures late on Thursday evening last week after House Speaker John Boehner had to cancel a scheduled vote on a tax-hike bill due to lack of Republican support, markets have not shown the same kind of volatility as in 2008 or 2011.
A gradual decline remains possible, Golub said, if business and consumer confidence continues to take a hit on the back of fiscal cliff worries. The Conference Board's measure of consumer confidence fell sharply in December, a drop blamed in part on the fiscal issues.
"If Congress came out and said that everything is off the table, yeah, that would be a short-term shock to the market, but that's not likely," said Richard Weiss, a Mountain View, California-based senior money manager at American Century Investments.
"Things will be resolved, just maybe not on a good time table. All else being equal, we see any further decline as a buying opportunity.

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