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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South Africa Suspends 8 Police Officers Accused of Dragging Man

PRETORIA (Reuters) - South Africa suspended eight police officers on Friday after the death of a man they had bound to a vehicle and dragged through a busy street in a videotaped incident that has further blackened the reputation of the police.

Mido Macia, a 27-year-old taxi driver from Mozambique, was found dead in detention with signs of head injuries and internal bleeding, according to an initial post-mortem report released by South Africa's police watchdog.

"We would like to assure the country and the world that what is in the video is not how the South African Police Service in a democratic South Africa goes about its work," Commissioner Riah Phiyega told a news conference.

She said the eight officers involved had been suspended and the station commander would be removed from his duties.

President Jacob Zuma and opposition politicians have condemned the incident, caught on video on Tuesday and broadcast nationwide on Thursday.

"The visuals of the incident are horrific, disturbing and unacceptable. No human being should be treated in that manner", Zuma said of what he called "the tragic death of a man in the hands of the police".

Police told media they had detained Macia after he parked illegally, creating a traffic jam, and then resisted arrest.

The video shows the man scuffling with police, who subdue him. He is then bound to the back of a pick-up truck by his arms before the vehicle drives off in front of scores of witnesses in the east Johannesburg area of Daveyton.

It was the latest in a series of scandals to hit South Africa's police force in recent months.

The lead detective in the murder case against Olympic and Paralympic star Oscar Pistorius was removed from the investigation last week when it emerged he was facing seven attempted murder charges for allegedly opening fire on a minibus full of passengers.

Police shot dead 34 striking workers at a platinum mine in August last year - the deadliest security incident since apartheid ended in 1994.

The latest video footage and the taxi driver's death raised fresh concerns about police brutality in a country where more than 1,200 people a year die while in custody.

(Reporting by Jon Herskovitz; Editing by Alistair Lyon)

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American Idol Reveals Its Top 20

By Steve Helling

02/28/2013 at 11:20 PM EST

From left: Randy Jackson, Mariah Carey, Ryan Seacrest, Nicki Minaj, Keith Urban

Michael Becker/FOX

American Idol has been on the air for 12 seasons. From the early days of Kelly Clarkson, the judges continually hounded the contestants on song choice. Simon Cowell (remember him?) would criticize contestants for being "cabaret," "old-fashioned" and, worst of all, "boring." Some of this season's contestants have been watching Idol since they were in elementary school, which makes it all the more inexplicable that they still choose to sing songs like Peggy Lee's "Fever," which is 57 years old.

The show began with the 10 contestants rising from the floor, Hunger Games-style. Five of them will continue, while five of them met their end. Find out who made it through to the next round …
Spoiler Alert! The final picks for the Top 20 follow:

Cortez Shaw: His ballad arrangement of David Guetta's "Titanium" was excellent – and it was a nice change to hear a song that was current and relevant. "Your range surprised me today," judge Randy Jackson said. "When you hit those big notes, I was shocked."

Burnell Taylor: He's lost 40 lbs. since auditioning, and singing John Legend's "This Time," he brought down the house – despite oddly exaggerated hand movements. "I would pay to hear you sing," said Nicki Minaj, sharing the best compliment of the night. Mariah Carey was also pleased, simply saying, "This was fantastic."

Lazaro Arbos: After delivering an emotional performance of Keith Urban's "Tonight I Want to Cry," the 21-year-old singer from Naples, Fla., was unanimously sent through to the next round. The Cuban-born Arbos has arguably the season's most poignant backstory, with a severe stutter that vanishes when he sings. Minaj remains a big fan, telling him: "You feel it. You stay in it. Don't change nothing."

Nick Boddington: The New York City bartender performed "Say Something Now" by James Morrison and did a passable – if unremarkable – job. "I kept waiting for the feeling of being connected to you as a person," said Urban. Carey agreed, saying, "I needed to feel you more connected to the song."

Vincent Powell: Singing Lenny Williams's "'Cause I Love You," he effortlessly broke into a falsetto that elicited cheers from the audience. After calling him a "sexy old-fashioned" singer, Minaj added, "I could envision a whole bunch of 50-year-olds throwing their panties at you." Powell, who works his day job as a church worship leader, laughed nervously.

And yes, it was guys' night, but finalist Zoanette Johnson made a cameo when she stood up and cheered Powell's performance, prompting host Ryan Seacrest to run over with a microphone. (For a brief moment, It felt like a '90s-era episode of Ricki Lake, which is actually a very good thing.) "Get it, Papa Smurf," Johnson screamed. "You go get it."

Leave it to Zoanette to steal the show on guy's night.

Tonight's finalists will join Charlie Askew, Curtis Finch Jr., Paul Jolley, Elijah Liu and Devin Velez – and 10 female finalists – to sing for America's votes next week.

Who are you rooting for?

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WHO: Slight cancer risk after Japan nuke accident

LONDON (AP) — Two years after Japan's nuclear plant disaster, an international team of experts said Thursday that residents of areas hit by the highest doses of radiation face an increased cancer risk so small it probably won't be detectable.

In fact, experts calculated that increase at about 1 extra percentage point added to a Japanese infant's lifetime cancer risk.

"The additional risk is quite small and will probably be hidden by the noise of other (cancer) risks like people's lifestyle choices and statistical fluctuations," said Richard Wakeford of the University of Manchester, one of the authors of the report. "It's more important not to start smoking than having been in Fukushima."

The report was issued by the World Health Organization, which asked scientists to study the health effects of the disaster in Fukushima, a rural farming region.

On March 11, 2011, an earthquake and tsunami knocked out the Fukushima plant's power and cooling systems, causing meltdowns in three reactors and spewing radiation into the surrounding air, soil and water. The most exposed populations were directly under the plumes of radiation in the most affected communities in Fukushima, which is about 150 miles (240 kilometers) north of Tokyo.

In the report, the highest increases in risk are for people exposed as babies to radiation in the most heavily affected areas. Normally in Japan, the lifetime risk of developing cancer of an organ is about 41 percent for men and 29 percent for women. The new report said that for infants in the most heavily exposed areas, the radiation from Fukushima would add about 1 percentage point to those numbers.

Experts had been particularly worried about a spike in thyroid cancer, since radioactive iodine released in nuclear accidents is absorbed by the thyroid, especially in children. After the Chernobyl disaster, about 6,000 children exposed to radiation later developed thyroid cancer because many drank contaminated milk after the accident.

In Japan, dairy radiation levels were closely monitored, but children are not big milk drinkers there.

The WHO report estimated that women exposed as infants to the most radiation after the Fukushima accident would have a 70 percent higher chance of getting thyroid cancer in their lifetimes. But thyroid cancer is extremely rare and one of the most treatable cancers when caught early. A woman's normal lifetime risk of developing it is about 0.75 percent. That number would rise by 0.5 under the calculated increase for women who got the highest radiation doses as infants.

Wakeford said the increase may be so small it will probably not be observable.

For people beyond the most directly affected areas of Fukushima, Wakeford said the projected cancer risk from the radiation dropped dramatically. "The risks to everyone else were just infinitesimal."

David Brenner of Columbia University in New York, an expert on radiation-induced cancers, said that although the risk to individuals is tiny outside the most contaminated areas, some cancers might still result, at least in theory. But they'd be too rare to be detectable in overall cancer rates, he said.

Brenner said the numerical risk estimates in the WHO report were not surprising. He also said they should be considered imprecise because of the difficulty in determining risk from low doses of radiation. He was not connected with the WHO report.

Some experts said it was surprising that any increase in cancer was even predicted.

"On the basis of the radiation doses people have received, there is no reason to think there would be an increase in cancer in the next 50 years," said Wade Allison, an emeritus professor of physics at Oxford University, who also had no role in developing the new report. "The very small increase in cancers means that it's even less than the risk of crossing the road," he said.

WHO acknowledged in its report that it relied on some assumptions that may have resulted in an overestimate of the radiation dose in the general population.

Gerry Thomas, a professor of molecular pathology at Imperial College London, accused the United Nations health agency of hyping the cancer risk.

"It's understandable that WHO wants to err on the side of caution, but telling the Japanese about a barely significant personal risk may not be helpful," she said.

Thomas said the WHO report used inflated estimates of radiation doses and didn't properly take into account Japan's quick evacuation of people from Fukushima.

"This will fuel fears in Japan that could be more dangerous than the physical effects of radiation," she said, noting that people living under stress have higher rates of heart problems, suicide and mental illness.

In Japan, Norio Kanno, the chief of Iitate village, in one of the regions hardest hit by the disaster, harshly criticized the WHO report on Japanese public television channel NHK, describing it as "totally hypothetical."

Many people who remain in Fukushima still fear long-term health risks from the radiation, and some refuse to let their children play outside or eat locally grown food.

Some restrictions have been lifted on a 12-mile (20-kilometer) zone around the nuclear plant. But large sections of land in the area remain off-limits. Many residents aren't expected to be able to return to their homes for years.

Kanno accused the report's authors of exaggerating the cancer risk and stoking fear among residents.

"I'm enraged," he said.

___

Mari Yamaguchi in Tokyo and AP Science Writer Malcolm Ritter in New York contributed to this report.

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Online:

WHO report: http://bit.ly/YDCXcb

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Stock index futures signal mixed start to March

LONDON (Reuters) - Stock index futures pointed to a mixed open on Wall Street on Friday, with futures for the S&P 500 up 0.3 percent, while Dow Jones and Nasdaq 100 futures were broadly flat at 0956 GMT.

Overnight equity market performance has been mixed, with Tokyo shares edging higher <.n225>, while European bourses were hit by economic growth concerns <.fteu3>.

China's factory growth cooled to multi-month lows in February as domestic demand dipped, weighing on firms already hit by slack foreign sales and underlining the patchiness of the country's economic recovery.

Euro zone manufacturing activity appeared no closer to recovery last month, when a dire performance in France offset a return to growth in Germany, PMI data showed. British manufacturing, meanwhile, shrank unexpectedly.

Absent a highly unlikely last-ditch deal, the $85 billion in cuts across federal government agencies start on Friday after the White House and Republicans failed to reach a deal. The measures are expected to shave at least 0.5 percent off U.S. economic growth.

Groupon Inc fired Andrew Mason as chief executive officer on Thursday, sending its shares up as much as 8 percent in after-hours trade, ousting a co-founder who failed to stop a gradual erosion of its main daily deals business.

Boeing Co will cut hundreds of jobs at a South Carolina plant that makes 787 Dreamliners over the course of this year, but the move has nothing to do with the recent grounding of the troubled jetliner, the Wall Street Journal reported on Thursday.

U.S. government-run mortgage finance provider Freddie Mac earned $11.0 billion last year, the first annual increase in its net income since 2006, the year the nation's housing bubble peaked.

Bank of America Corp BAC.N said in a securities filing on Thursday that the New York State Attorney General was investigating the bank over its purchase, securitization and underwriting of home loans.

Gap Inc's fourth-quarter profit beat estimates, helped by higher comparable store sales in North America and the apparel retailer raised its dividend for this year by 20 percent to 60 cents.

Salesforce.com Inc reported better-than-expected quarterly sales of $835 million on Thursday, as its cloud-based services continued to sell well despite an uncertain macroeconomic picture. Its shares gained 4.9 percent after hours to $177.50.

Paulson & Co, the largest shareholder of MetroPCS Communications Inc , said it will vote against the wireless service provider's proposed merger with T-Mobile USA, a unit of Deutsche Telekom AG , unless the companies sweeten the deal.

Best Buy Co ended talks with founder Richard Schulze over a deal in which he and a group of buyout firms were proposing to take a minority stake in the firm in exchange for three seats on the board, the Wall Street Journal reports, citing people familiar with the matter.

Friday's bumper data calendar features PCE inflation data for January alongside the Thomson Reuters/University of Michigan sentiment index and the Institute for Supply Management's manufacturing index for February.

The Dow Jones industrial average <.dji> fell 20.88 points, or 0.15 percent, to 14,054.49 on Thursday. The Standard & Poor's 500 Index <.spx> lost 1.31 points, or 0.09 percent, to 1,514.68. The Nasdaq Composite Index <.ixic> fell 2.07 points, or 0.07 percent, to end at 3,160.19.

(Reporting by Francesco Canepa and Toni Vorobyova; Editing by Catherine Evans)

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Benedict XVI Begins Final Day as Pope

VATICAN CITY — In his final hours as head of the Roman Catholic church, a day after blessing the faithful for the last time as pope, Benedict XVI met on Thursday with the cardinals who will elect his successor urging them to be “like an orchestra” that harmonizes well for the good of the Church. It was one of the concluding acts of a nearly eight-year papacy that he said was filled with “light and joy” but also darker moments. Benedict will later leave the Vatican by helicopter for the papal summer residence where his retirement will formally take effect at 8 p.m. local time.

The pope greeted the cardinals individually, after thanking them for their service. Each cardinal came up to greet him and kiss his ring, as Benedict stood, draped in a red mantle lined with snow-white ermine, before a golden throne in the Clementine Hall of the Apostolic Palace. 

As the cardinals meet in coming days to choose a new pope, Benedict told them, “I will be close to you in prayer” and said he would behave with “unconditional reverence and obedience” toward his successor. The comment underscored the concern among Vatican-watchers about what it will mean to have two popes residing in the Vatican.

Benedict will initially reside in Castel Gandolfo, a hilltop town outside Rome where popes have summered for centuries. He is expected to stay there for several months before returning to the Vatican, where he will live in a convent with a fountain and gardens that look out with a perfect view of the dome of St. Peter’s Basilica.

The cardinals, sometimes called the princes of the church, lined up to bid farewell to Benedict, who, along with his predecessor, John Paul II, had elevated many of them to their powerful positions.

In an emotional and unusually personal message on Wednesday, his final public audience in St. Peter’s Square, Benedict said that sometimes he felt that “the waters were agitated and the winds were blowing against” the church, and other days when “the Lord seemed to be sleeping.”

Benedict shocked the world on Feb. 11 when he announced that, feeling his age and diminishing strength, he would retire, a dramatic step that sent the members of the Vatican hierarchy into a tailspin. He reassured the faithful on Sunday that he was not “abandoning” the church, but would continue to serve, even in retirement.

Starting Thursday night, Benedict will be called “pope emeritus” and will don a white cassock and brown shoes from Mexico, replacing the red slippers that he and other popes have traditionally worn, the red symbolizing the blood of the martyrs.

The conclave to elect the next pope, which is expected to start by mid-March, will begin amid a swirl of scandal. On Monday, Cardinal Keith O’Brien, Britain’s senior Roman Catholic cleric said that he would not participate in the conclave, after having been accused of “inappropriate acts” with several priests, charges that he denies. Other cardinals have also come under fire in sex abuse scandals, but only Cardinal O’Brien has recused himself.

On Monday, Benedict met with three cardinals he had asked to conduct an investigation into the “VatiLeaks” scandal in which hundreds of confidential documents were leaked to the press and published in a tell-all book last May, the worst security breach in the church’s modern history. The three cardinals compiled a hefty dossier on the scandal, which Benedict has entrusted only to his successor, not to the cardinals entering the conclave, the Vatican spokesman said earlier this week.

On Thursday, Panorama, a weekly magazine, reported that the Vatican secretary of state, Cardinal Tarcisio Bertone, had been conducting his own investigation into the leaks scandal, including requesting wiretaps on the phones of some members of the Vatican hierarchy.

A shy theologian who appeared to have little interest in the internal politics of the Vatican, Benedict has said that he is retiring “freely, and for the good of the church,” entrusting it to a successor who has more strength than he. But shadows linger. The next pope will inherit a hierarchy buffeted by crises of governance as well as power struggles over the Vatican Bank, which has struggled to conform to international transparency norms.

Many faithful have welcomed Benedict’s gesture as a sign of humility and humanity, a rational decision taken by a man who no longer feels up to the job.

As he stood near St. Peter’s Square on Wednesday after attending the pope’s last public audience, Vincenzo Petrucci, 26, said he had come to express “not so much solidarity, but more like closeness” to the pope. “At first we felt astonished, shocked and disoriented,” he said. “But then we saw what a weighty decision it must have been. He seemed almost lonely.”

Many in the Vatican hierarchy, known as the Roman Curia, are still reeling from the news. Many are bereaved and others seem almost angry. “We are terribly, terribly, terribly shocked,” one senior Vatican official said, speaking on condition of anonymity.

Alan Cowell contributed reporting from Paris.

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American Idol Reveals Its Top 10 Women

TV Watch

American Idol

02/27/2013 at 10:45 PM EST

From left: Randy Jackson, Mariah Carey, Ryan Seacrest, Nicki Minaj, Keith Urban

Michael Becker/FOX

American Idol's's list of the top 10 women is complete!

After the first week of sudden-death rounds, the judges gave their stamp of approval to five more female singers Wednesday night. And they sent five others home.

Keep reading to find out who's in and who's out on Idol ...

Here are the five contestants who are moving on in the competition:

1. Zoanette Johnson: The Tulsa resident, 20, was the first to be put through by the judges, who showered her with praise for singing a spirited version of "Circle of Life" from The Lion King. Keith Urban declared her "queen of the jungle." Nicki Minaj told Zoanette, "You make me so emotional ... You're the person we're going to remember tonight."

2. Aubrey Cleland: After singing a slowed-down version of Beyoncé's "Sweet Dreams," Mariah Carey told Cleland, 19, "You're limitless." Nicki and Randy Jackson pointed out her commercial appeal. "Lookin' like a current artist, soundin' like one, feelin' like one," said Nicki of the performance.

3. Candice Glover: Taking on Aretha Franklin's "(You Make Me Feel Like) A Natural Woman" paid off for the singer, 23, who earned a standing ovation from Keith. Randy said she was "one of my favorite singers in the whole competition."

4. Breanna Steer: "You're extremely marketable and gorgeous and talented," Mariah told the singer, 18, after she sang a dramatic version of Jazmine Sullivan's "Bust Your Windows" that had Randy wanting to sign her up for a recording contract. "You got the whole package," he said. "You brought so much drama."

5. Janelle Arthur: She beat out the other country singer in the competition, Rachel Hale, for the final spot in the women's top 10 after singing Lady Antebellum's "Just a Kiss." Though Randy called Arthur, 23, his "favorite country singer in this competition," the other judges questioned her song choice. "[The song] doesn't give you a chance to really soar," Keith said. "The melody kept pulling you back."

These five will join the five female finalists announced last week – Kree Harrison, Amber Holcomb, Adriana Latonio, Angela Miller and Tenna Torres – as well as the five men – Charlie Askew, Curtis Finch Jr., Paul Jolley, Elijah Liu and Devin Velez. Ten more guys will sing Thursday (8 p.m. ET) and five will move on to round out season 12's top 20.

Did the judges make the right decisions? Sound off in the comments below.

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Medicare paid $5.1B for poor nursing home care

SAN FRANCISCO (AP) — Medicare paid billions in taxpayer dollars to nursing homes nationwide that were not meeting basic requirements to look after their residents, government investigators have found.

The report, released Thursday by the Department of Health and Human Services' inspector general, said Medicare paid about $5.1 billion for patients to stay in skilled nursing facilities that failed to meet federal quality of care rules in 2009, in some cases resulting in dangerous and neglectful conditions.

One out of every three times patients wound up in nursing homes that year, they landed in facilities that failed to follow basic care requirements laid out by the federal agency that administers Medicare, investigators estimated.

By law, nursing homes need to write up care plans specially tailored for each resident, so doctors, nurses, therapists and all other caregivers are on the same page about how to help residents reach the highest possible levels of physical, mental and psychological well-being.

Not only are residents often going without the crucial help they need, but the government could be spending taxpayer money on facilities that could endanger people's health, the report concluded. The findings come as concerns about health care quality and cost are garnering heightened attention as the Obama administration implements the nation's sweeping health care overhaul.

"These findings raise concerns about what Medicare is paying for," the report said.

Investigators estimate that in one out of five stays, patients' health problems weren't addressed in the care plans, falling far short of government directives. For example, one home made no plans to monitor a patient's use of two anti-psychotic drugs and one depression medication, even though the drugs could have serious side effects.

In other cases, residents got therapy they didn't need, which the report said was in the nursing homes' financial interest because they would be reimbursed at a higher rate by Medicare.

In one example, a patient kept getting physical and occupational therapy even though the care plan said all the health goals had been met, the report said.

The Office of Inspector General's report was based on medical records from 190 patient visits to nursing homes in 42 states that lasted at least three weeks, which investigators said gave them a statistically valid sample of Medicare beneficiaries' experiences in skilled nursing facilities.

That sample represents about 1.1 million patient visits to nursing homes nationwide in 2009, the most recent year for which data was available, according to the review.

Overall, the review raises questions about whether the system is allowing homes to get paid for poor quality services that may be harming residents, investigators said, and recommended that the Centers for Medicare & Medicaid Services tie payments to homes' abilities to meet basic care requirements. The report also recommended that the agency strengthen its regulations and ramp up its oversight. The review did not name individual homes, nor did it estimate the number of patients who had been mistreated, but instead looked at the overall number of stays in which problems arose.

In response, the agency agreed that it should consider tying Medicare reimbursements to homes' provision of good care. CMS also said in written comments that it is reviewing its own regulations to improve enforcement at the homes.

"Medicare has made significant changes to the way we pay providers thanks to the health care law, to reward better quality care," Medicare spokesman Brian Cook said in a statement to AP. "We are taking steps to make sure these facilities have the resources to improve the quality of their care, and make sure Medicare is paying for the quality of care that beneficiaries are entitled to."

CMS hires state-level agencies to survey the homes and make sure they are complying with federal law, and can require correction plans, deny payment or end a contract with a home if major deficiencies come to light. The agency also said it would follow up on potential enforcement at the homes featured in the report.

Greg Crist, a Washington-based spokeswoman for the American Health Care Association, which represents the largest share of skilled nursing facilities nationwide, said overall nursing home operators are well regulated and follow federal guidelines but added that he could not fully comment on the report's conclusions without having had the chance to read it.

"Our members begin every treatment with the individual's personal health needs at the forefront. This is a hands-on process, involving doctors and even family members in an effort to enhance the health outcome of the patient," Crist said.

Virginia Fichera, who has relatives in two nursing homes in New York, said she would welcome a greater push for accountability at skilled nursing facilities.

"Once you're in a nursing home, if things don't go right, you're really a prisoner," said Fichera, a retired professor in Sterling, NY. "As a concerned relative, you just want to know the care is good, and if there are problems, why they are happening and when they'll be fixed."

Once residents are ready to go back home or transfer to another facility, federal law also requires that the homes write special plans to make sure patients are safely discharged.

Investigators found the homes didn't always do what was needed to ensure a smooth transition.

In nearly one-third of cases, facilities also did not provide enough information when the patient moved to another setting, the report found.

___

On the Web:

The OIG report: http://1.usa.gov/VaztQm

The Medicare nursing home database: http://www.medicare.gov/NursingHomeCompare/search.aspx?bhcp=1&AspxAutoDetectCookieSupport=1

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Follow Garance Burke on Twitter at —http://twitter.com/garanceburke.

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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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Letter from India: Revisiting the Horror in Sri Lanka

NEW DELHI — In the series of photographs shot in 2009, the bare-chested boy is first shown seated on a bench watching something outside the frame. Then he is seen having a snack. In the third image he is lying on the ground with bullet holes in his chest. The photographs, which were released last week by the British broadcaster Channel 4, appear to document the final moments in the life of 12-year-old Balachandran Prabhakaran, the youngest son of the slain founder of the Liberation Tigers of Tamil Eelam, Velupillai Prabhakaran.

The images are from the documentary film “No Fire Zone,” which tells the story of Sri Lanka’s violent suppression of Mr. Prabhakaran’s equally violent revolution, which had come very close to securing a separate state for the Tamil minority of Sri Lanka. After 26 years of civil war between the Tamils, who are chiefly Hindus, and the Sinhalese majority, who are chiefly Buddhists, the Sri Lankan state won decisively in 2009. Human rights activists say that hundreds of Tamil fighters, political leaders and their families, including Mr. Prabhakaran and his family, did not die in action but were executed. They estimate that more than 40,000 Tamil civilians died in the final months of the war.

Within its borders, the Sri Lankan government appears to wink at its Sinhalese population to accept their congratulations for ending the war, but it maintains a righteous indignation when the world accuses its army of planned genocide.

“No Fire Zone” includes video footage and photographs shot on mobile phones by Tamil survivors and Sinhalese soldiers that were somehow leaked. The film’s director, Callum Macrae, told me that it will be screened at the 22nd session of the U.N. Human Rights Council, now under way in Geneva, where the United States plans to introduce a resolution asking Sri Lanka to investigate the allegations of war crimes by its army.

It is not clear what such a resolution will achieve because Sri Lanka’s powerful president, Mahinda Rajapaksa, who has a rustic swagger about him and a manly black mustache, is the triumphant face of Sri Lanka’s victory in the war. The Sri Lankan Army is unambiguously under his control. Whatever the worth of the resolution, India is expected to support it more enthusiastically than it did a similar resolution last March.

Over the years, the shape and location of Sri Lanka have inspired several Indian cartoonists to portray the island nation as a tear drop beneath India’s peninsular chin. This is an illogical depiction of Sri Lanka’s trauma because a tear drop is not sorrowful; it is a consequence of someone’s sorrow. Some caricatures that appeared in the late 1980s and early 1990s, however, showed the Indian peninsula weeping and Sri Lanka as the consequent tear drop. This imagery had a stronger logic. India’s history with Sri Lanka is, in a way, about a bumbling giant being hurt by a cunning dwarf.

Under the late Prime Minister Indira Gandhi, the type of strategists who imagine they are great Machiavellian characters, and love to add the prefix “geo” to “politics” to feel good about their advisory jobs, ensured that India armed and financed the Tamil rebels. In 1984, when she was assassinated and her son Rajiv Gandhi took over as prime minister, Sri Lanka was engaged in a full-fledged civil war. Now, India wanted to play gracious giant in the region and bring peace to Sri Lanka. In 1987, it sent troops to achieve that end. It was a disastrous move, and resulted in the deaths of nearly 1,200 Indian soldiers and thousands of Tamil fighters. In an act of vengeance, Mr. Prabhakaran made his greatest strategic blunder: ordering the assassination of Rajiv Gandhi.

On the early morning of May 22, 1991, as the news spread through Madras (now Chennai) by phone and radio, I saw people run out of their homes in some kind of delirium to pick up the newspapers from their porches. The city had just woken up to the improbable fact that a suicide bomber had killed Mr. Gandhi the previous night in a small town not far from Chennai. Until then, the southern state of Tamil Nadu, whose capital is Chennai, was a haven for the Tamil Tigers. Bound by a common language, the masses of Tamil Nadu felt a deep compassion for the struggle of Sri Lankan Tamils. But Mr. Gandhi’s assassination was seen by them as an act of war against India. The chief minister of Tamil Nadu at the time, Muthuvel Karunanidhi, who was accused of being a friend of the Tigers, went around Chennai in an open-roof van, standing with his palms joined in apology. That was not good enough. In the 1991 Tamil Nadu assembly elections, his party won only two seats.

But now, the plight of the Sri Lankan Tamils has returned as a passionate political issue in Tamil Nadu. Mr. Karunanidhi is too old to stand anymore but even as a patriarch who uses a wheelchair, he is a useful ally of the Indian National Congress party, which heads the national government. He has often demanded that the accomplices of Mr. Gandhi’s assassin now on death row in India be pardoned, and that President Rajapaksa be tried on war crimes charges. Last year, when the United States introduced a resolution against Sri Lanka, India was reluctant to back it for strategic reasons, including that it has commercial interests in Sri Lanka, which China is fast grabbing. But Mr. Karunanidhi and public sentiment in Tamil Nadu finally persuaded the Indian government to support it.

In a few days, when the United States introduces its new resolution against Sri Lanka, the brute forces of politics and practicality will ensure that the Indian government led by the Congress party, whose leader is Sonia Gandhi, will join other nations in asking Sri Lanka to explain how exactly it eliminated the organization that made her a widow.

Manu Joseph is editor of the Indian newsweekly Open and author of the novel “The Illicit Happiness of Other People.”

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