Wall Street rebounds on HP results, Fed officials' views

NEW YORK (Reuters) - U.S. stocks rose on Friday as Dow component Hewlett-Packard surged on strong results and comments from Fed officials allayed fears that the central bank would curtail its stimulus measures.

Federal Reserve Chairman Ben Bernanke downplayed worries that the Fed has fueled asset bubbles that could hurt the economy in a private meeting with bond dealers and investors earlier this month, Bloomberg reported on Friday.

Bernanke's view helped ease fears that the central bank may end its easy money policies. Minutes from the Federal Reserve's January meeting hit markets on Wednesday as investors interpreted divergent opinions on the benefit of stimulus as a sign the measures may be halted sooner than thought.

"They are in uncharted territory with divergent views," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. "I could see some pretty heated opinions on what the ultimate outcome is, so I do believe there is dissension."

Hewlett-Packard Co shares jumped more than 12 percent and gave one of the biggest boosts to both the Dow and the S&P 500 after the personal computer maker's quarterly revenue and forecasts beat expectations. Hewlett-Packard's stock rose to $19.20 at the close, up 12.3 percent for the day.

The Dow Jones industrial average <.dji> gained 119.95 points, or 0.86 percent, to 14,000.57 at the close. The Standard & Poor's 500 Index <.spx> rose 13.18 points, or 0.88 percent, to 1,515.60. The Nasdaq Composite Index <.ixic> added 30.33 points, or 0.97 percent, to end at 3,161.82.

With Bernanke's reported comments much on their minds in Friday's session, investors will want the Fed chairman to reiterate his remarks publicly when he speaks before the Senate Banking Committee on Tuesday. That would echo comments made by two top Fed officials on Friday.

Boston Fed President Eric Rosengren and Fed Governor Jerome Powell both defended the U.S. central bank's asset-buying program, arguing that the policy helps the U.S. economy.

The S&P 500 shed 1.9 percent over the previous two sessions, its worst two-day drop since early November, following the release of the Fed's minutes on Wednesday. The selloff marked the end of seven back-to-back weeks of gains for stocks.

For the week, the S&P 500 slipped 0.3 percent and the Nasdaq lost nearly 1 percent. Only the Dow ended the week with a gain - up just 0.1 percent.

HP's results come near the end of a relatively strong earnings season in which 70 percent of S&P 500 companies beat analysts' expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data.

"Overall, the earnings supports were better than expected in this cycle," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois. "We may see the market rising during the month of March."

Fourth-quarter earnings for S&P 500 companies are estimated to have risen 6 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

But with only a handful of companies left to report earnings, investors are looking ahead to the possibility of hefty automatic budget cuts that could happen on March 1.

A large option investor appeared to be adjusting a bearish view on the SPDR S&P 500 Trust fund while locking in previously established gains, in a possible hedge ahead of the automatic budget cuts that are set to take effect at the beginning of next month. The play involved weekly puts, expiring next Friday.

"An institutional investor appears to be rolling down and increasing in size a defensive hedge timed to match the March 1 deadline for the sequester," said Henry Schwartz, president of options analytics firm Trade Alert.

The trader sold 132,000 $149 to $150 weekly put spreads for 22 cents as shares of the exchange-traded fund had traded near $151.14 on Friday morning. The transaction entailed the sale of $150 weekly puts to buy the $149 weekly puts. In addition, the investor purchased another 42,000 $149 weekly puts, which increases the size of the hedge to 174,000 contracts.

"It is likely this large position protects an existing underlying long position in a portfolio," Schwartz said.

In another political risk factor, Italians go to the polls this weekend in an election that could threaten reforms in the indebted country. Silvio Berlusconi's resurgence has thrown the vote wide open, with deep uncertainty over whether the poll can produce the strong government the country needs.

Inconclusive Greek elections last year sparked a protracted selloff and a period of uncertainty in markets.

In the tech sector, Marvell Technology Group Ltd forecast results this quarter that were largely above analysts' expectations. Marvell gained market share in the hard-disk drive and flash-storage businesses. The stock rose 4.4 percent to $9.89.

Texas Instruments Inc raised its dividend by a third and boosted its stock-buyback program, driving its stock up 5.2 percent to $34.18.

The PHLX semiconductor index <.sox> gained 2.1 percent.

"Dividends growing are another way the market's level is justified, if not especially attractive at these levels," said Rex Macey, chief investment officer of Wilmington Trust in Atlanta, who manages about $20 billion in assets.

On the downside, Abercrombie & Fitch dropped 4.5 percent to $46.86 after the youth-oriented clothing retailer reported a drop in fourth-quarter comparable sales, even as its latest quarterly earnings topped estimates.

Insurer American International Group Inc posted fourth-quarter results that beat analysts' expectations. AIG's stock advanced 3.1 percent to $38.45.

About three stocks rose for every one that fell on both the New York Stock Exchange and Nasdaq.

Around 5.8 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the 20-day moving average of around 6.51 billion shares.

(Additional Reporting by Ryan Vlastelica and Doris Frankel; Editing by Kenneth Barry and Jan Paschal)

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Abe: Japan acting calmly in island dispute with China

WASHINGTON (Reuters) - Japanese Prime Minister Shinzo Abe on Friday said he told President Barack Obama in a meeting that Japan would act calmly in its row with China over tiny islands in the East China Sea claimed by both Asian countries.

"I explained that we have always been dealing with this issue ... in a calm manner," he said through a translator, while sitting next to Obama in the White House Oval Office.

"We will continue to do so and we have always done so," he said.

Tension has raised fears of an unintended military incident near the islands, known as the Senkaku in Japan and the Diaoyu in China. Washington says the islets fall under a U.S.-Japan security pact, but it is eager to avoid a clash in the region.

Abe said the existence of the Japan-U.S. alliance was a stabilizing factor in the area.

"We agreed that we would stay in close coordination with each other in dealing with such issues and other issues," he said.

Obama, in his remarks to reporters, said Japan was one of the United States' closest allies. He said the two men would discuss trade and other economic issues and agreed that their top priority was economic growth.

Obama declined to answer a reporter's question on whether they would discuss the Japanese yen.

Expectations for Abe's economic programs, especially monetary easing, have cut some 10 percent off the yen's value against the U.S. dollar since Abe took office, raising concern that Japan is weakening its currency to export its way out of recession.

Obama and Abe also discussed North Korea and agreed to cooperate at the United Nations over the issue. Abe said the two men also talked about additional sanctions against North Korea, which tested a nuclear bomb last week in defiance of U.N. resolutions.

(Editing by Vicki Allen)

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'Jack the Giant Slayer' Ewan McGregor & Nicholas Hoult Interviews

Fee-fi-fo-fum! The classic Jack and the Beanstalk fable gets a brand-new twist with Bryan Singer (X-Men movies, Superman Returns) at the helm with Jack the Giant Slayer, and ET's Christina McLarty is in London with the cast, who all seem to agree that actually climbing a beanstalk to a realm of giants in the sky would be pretty terrifying.

Pics: 13 Must-See Movies of 2013

"In the film, of course, we're all very gung-ho about it; we're not afraid of heights or anything," says Ewan MacGregor. "But in reality I think it would be terrifying."

"I think what would happen is most people would start out [climbing]," chimes in Stanley Tucci. "And then once you hit the troposphere or something, you kinda go, 'Nah.'"

"Then how do you get down?" asks Ewan. "You just scream," replies Stanley. "Help!!!"

In theaters March 1, Jack the Giant Slayer stars Nicholas Hoult (Warm Bodies, About a Boy) in the title role as a young farmhand who unwittingly receives some magic beans that open a gateway between his medieval world and a fearsome race of giants in the sky. When the kingdom's adventurous princess (Eleanor Tomlinson) is trapped in the giant's realm, he must team up with the king's men – some noble, some nefarious – to rescue her and thwart a war between worlds.

Video: Watch the 'Jack' Trailer!

Technology was not quite ready to do the story justice in the past on the big screen, and Nick notes that previous Jacks always seemed to wear tights, which didn't sit well with him: "The first thing when I turned up on this one I was like, 'No tights for me.'"

Watch ET for more with the stars of Jack the Giant Slayer!

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Flu shot doing a poor job of protecting elderly

ATLANTA (AP) — It turns out this year's flu shot is doing a startlingly dismal job of protecting senior citizens, the most vulnerable age group.

The vaccine is proving only 9 percent effective in people 65 and older against the harsh strain of the flu that is predominant this season, the Centers for Disease Control and Prevention said Thursday.

Health officials are baffled as to why this is so. But the findings help explain why so many older people have been hospitalized with the flu this year.

Despite the findings, the CDC stood by its recommendation that everyone over 6 months get flu shots, the elderly included, because some protection is better than none, and because those who are vaccinated and still get sick may suffer less severe symptoms.

"Year in and year out, the vaccine is the best protection we have," said CDC flu expert Dr. Joseph Bresee.

Overall, across the age groups studied, the vaccine's effectiveness was found to be a moderate 56 percent, which means those who got a shot have a 56 percent lower chance of winding up at the doctor with the flu. That is somewhat worse than what has been seen in other years.

For those 65 and older, the vaccine was only 27 percent effective against the three strains it is designed to protect against, the worst level in about a decade. It did a particularly poor job against the tough strain that is causing more than three-quarters of the illnesses this year.

It is well known that flu vaccine tends to protect younger people better than older ones. Elderly people have weaker immune systems that don't respond as well to flu shots, and they are more vulnerable to the illness and its complications, including pneumonia.

But health officials said they don't know why this year's vaccine did so poorly in that age group.

One theory, as yet unproven, is that older people's immune systems were accustomed to strains from the last two years and had more trouble switching gears to handle this year's different, harsh strain.

The preliminary data for senior citizens is less than definitive. It is based on fewer than 300 people scattered among five states.

But it will no doubt surprise many people that the effectiveness is that low, said Michael Osterholm, a University of Minnesota infectious-disease expert who has tried to draw attention to the need for a more effective flu vaccine.

Among infectious diseases, flu is considered one of the nation's leading killers. On average, about 24,000 Americans die each flu season, according to the CDC.

This flu season started in early December, a month earlier than usual, and peaked by the end of year. Hospitalization rates for people 65 and older have been some of the highest in a decade, at 146 per 100,000 people.

Flu viruses tend to mutate more quickly than others, so a new vaccine is formulated each year to target the strains expected to be the major threats. CDC officials have said that in formulating this year's vaccine, scientists accurately anticipated the strains that are circulating this season.

Because of the guesswork involved, scientists tend to set a lower bar for flu vaccine. While childhood vaccines against diseases like measles are expected to be 90 or 95 percent effective, a flu vaccine that's 60 to 70 percent effective in the U.S. is considered pretty good. By that standard, this year's vaccine is OK.

For senior citizens, a flu vaccine is considered pretty good if it's in the 30 to 40 percent range, said Dr. Arnold Monto, a University of Michigan flu expert.

A high-dose version of the flu shot was recently made available for those 65 and older, but the new study was too small to show whether that has made a difference.

The CDC estimates are based on about 2,700 people who got sick in December and January. The researchers traced back to see who had gotten shots and who hadn't. An earlier, smaller study put the vaccine's overall effectiveness at 62 percent, but other factors that might have influenced that figure weren't taken into account.

The CDC's Bresee said there is a danger in providing preliminary results because it may result in people doubting — or skipping — flu shots. But the figures were released to warn older people who got shots that they may still get sick and shouldn't ignore any serious flu-like symptoms, he said.

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Online:

CDC report: http://www.cdc.gov/mmwr

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Wall Street ends lower on growth worries

NEW YORK (Reuters) - U.S. stocks fell for a second straight day on Thursday and the S&P 500 posted its worst two-day loss since November after reports cast doubt over the health of the U.S. and euro-zone economies.

But a late-day rally helped stocks erase some of their losses with most of the pullback concentrated in the technology- heavy Nasdaq. The move suggested investors were still willing to buy on dips even after the sharp losses in the last session.

In Europe, business activity indexes dealt a blow to hopes that the euro zone might emerge from recession soon, showing the downturn across the region's businesses unexpectedly grew worse this month.

"The PMI numbers out of Europe were really a blow to the market," said Jack De Gan, chief investment officer at Harbor Advisory in Portsmouth, New Hampshire. "The market was expecting signs that recovery is still there, but the numbers just highlighted that the euro-zone problem is still persistent."

U.S. initial claims for unemployment benefits rose more than expected last week while the Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. mid-Atlantic region fell in February to the lowest in eight months.

Gains in Wal-Mart Stores Inc shares helped cushion the Dow. The shares gained 1.5 percent to $70.26 after the world's largest retailer reported earnings that beat expectations, though early February sales were sluggish.

The Dow Jones industrial average <.dji> fell 46.92 points, or 0.34 percent, to 13,880.62 at the close. The Standard & Poor's 500 Index <.spx> lost 9.53 points, or 0.63 percent, to 1,502.42. The Nasdaq Composite Index <.ixic> dropped 32.92 points, or 1.04 percent, to close at 3,131.49.

The two-day decline marked the U.S. stock market's first sustained pullback this year. The Standard & Poor's 500 has fallen 1.8 percent over the period and just managed to hold the 1,500 level on Thursday. Still, the index is up 5.3 percent so far this year.

The abrupt reversal in markets, which started on Wednesday after minutes from the Federal Reserve's January meeting suggested stimulus measures may end earlier than thought, looks set to halt a seven-week winning streak for stocks that had lifted the Dow and the S&P 500 close to all-time highs.

Wall Street will soon face another test with the upcoming debate in Washington over the automatic across-the-board spending cuts put in place as part of a larger congressional budget fight. Those cuts, set to kick in on March 1 unless lawmakers agree on an alternative, could depress the economy.

Semiconductor stocks ranked among the weakest of the day, pressuring the Nasdaq as the Philadelphia Semiconductor Index <.sox> fell 1.8 percent. Intel Corp fell 2.3 percent to $20.25 while Advanced Micro Devices lost 3.7 percent to $2.60 as the S&P 500's biggest percentage decliner.

The Dow also got a helping hand from personal computer maker Hewlett-Packard Co , which rose 2.3 percent to end the regular session at $17.10. The company was scheduled due to report first-quarter results after the closing bell.

Shares of Boeing Co rose 1.6 percent to $76.01 as a senior executive was set to meet with the head of the U.S. Federal Aviation Administration on Friday and present a series of measures to prevent battery failures that grounded its 787 Dreamliner fleet, according to a source familiar with the plans.

In other company news, shares of supermarket operator Safeway Inc jumped 14.1 percent to $22.97 after the company reported earnings that beat expectations.

Shares of VeriFone Systems Inc tumbled nearly 43 percent to $18.24 after the credit-card swipe machine maker forecast first- and second-quarter profits well below expectations.

Of the 427 companies in the S&P 500 that have reported results so far, 69.3 percent have exceeded analysts' expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data through Thursday morning.

Fourth-quarter earnings for S&P 500 companies are estimated to have risen 5.9 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

Berry Petroleum Co jumped 19.3 percent to $46.02 after oil and gas producer Linn Energy LLC said it would buy the company in an all-stock deal valued at $4.3 billion, including debt. Linn Energy shares advanced 2.8 percent to $37.68.

About two stocks fell for everyone that rose on the New York Stock Exchange and Nasdaq. About 7.64 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, well above the 20-day moving average of around 6.6 billion shares.

(Editing by Jan Paschal)

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French, Malian forces fight Islamist rebels in Gao

GAO, Mali (Reuters) - French and Malian troops fought Islamists on the streets of Gao and a car bomb exploded in Kidal on Thursday, as fighting showed little sign of abating weeks before France plans to start withdrawing some forces.

Reuters reporters in Gao in the country's desert north said French and Malian forces fired at the mayor's office with heavy machineguns after Islamists were reported to have infiltrated the Niger River town during a night of explosions and gunfire.

French Defense Minister Jean-Yves Le Drian told a news conference in Brussels that Gao was back under control after clashes earlier in the day.

"Malian troops supported by French soldiers killed five jihadists and the situation is back to normal," he said.

In Kidal, a remote far north town where the French are hunting Islamists, residents said a car bomb killed two. A French defense ministry source reported no French casualties.

French troops dispatched to root out rebels with links to al Qaeda swiftly retook northern towns last month. But they now risk being bogged down in a guerrilla conflict as they try to help Mali's weak army counter bombings and raids.

"There was an infiltration by Islamists overnight and there is shooting all over the place," Sadou Harouna Diallo, Gao's mayor, told Reuters by telephone earlier in the day, saying he was not in his office at the time.

Gao is a French hub for operations in the Kidal region, about 300 km (190 miles) northeast, where many Islamist leaders are thought to have retreated and foreign hostages may be held.

"They are black and two were disguised as women," a Malian soldier in Gao who gave his name only as Sergeant Assak told Reuters during a pause in heavy gunfire around Independence Square.

Six Malian military pickups were deployed in the square and opened fire on the mayor's office with the heavy machineguns. Two injured soldiers were taken away in an ambulance.

French troops in armored vehicles later joined the battle as it spilled out into the warren of sandy streets, where, two weeks ago, they also fought for hours against Islamists who had infiltrated the town via the nearby river.

Helicopters clattered over the mayor's office, while a nearby local government office and petrol station was on fire.

A Gao resident said he heard an explosion and then saw a Malian military vehicle on fire in a nearby street.

Paris has said it plans to start withdrawing some of its 4,000 troops from Mali next month. But rebels have fought back against Mali's weak and divided army, and African forces due to take over the French role are not yet in place.

Islamists abandoned the main towns they held but French and Malian forces have said there are pockets of Islamist resistance across the north, which is about the size of France.

CAR BOMB

Residents reported a bomb in the east of Kidal on Thursday.

"It was a car bomb that exploded in a garage," said one resident who went to the scene but asked not to be named.

"The driver and another man were killed. Two other people were injured," he added.

A French defense ministry official confirmed there had been a car bomb but said it did not appear that French troops, based at the town's airport, had been targeted.

Earlier this week, a French soldier was killed in heavy fighting north of Kidal, where French and Chadian troops are hunting Islamists in the Adrar des Ifoghas mountains, which border Algeria.

Operations there are further complicated by the presence of separatist Tuareg rebels, whose rebellion triggered the fighting in northern Mali last year but were sidelined by the better-armed Islamists.

Having dispatched its forces to prevent an Islamist advance south in January, Paris is eager not to become bogged down in a long-term conflict in Mali. But their Malian and African allies have urged French troops not to pull out too soon.

(Additional reporting by Emanuel Braun in Gao, Adama Diarra in Bamako, David Lewis and John Irish in Dakar and Adrian Croft in Brussels; Writing by David Lewis; Editing by Jason Webb and Roger Atwood)

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Apple’s Retina display for the next-gen iPad mini is reportedly already in development

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Miranda Lambert Guest Stars on Project Runway

Miranda Lambert is flaunting her curves and looking all-around fabulous in this exclusive clip from Project Runway's brand-new episode Thursday, in which the remaining designers will be creating an outfit especially for the country cutie.

"I don't know if the fabric on me will be super-forgiving. Doesn't look like I can squeeze a Spank underneath that very easily," she laughs, giving her honest opinion on a contestant's tight-fitting creation.

Video: Bette Midler Nails Her 'Project Runway' Appearance

Though judge Nina Garcia begs to differ.

"With your curves, you're gonna rock this dress," she insists.

Video: Watch Susan Sarandon Have a Ball on 'Project Runway'

Check out the video to judge for yourself!

Project Runway featuring guest star Miranda Lambert airs on Thursday, Feb. 21, 2013 at 9 p.m. ET on Lifetime.

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Obama administration tackles colonoscopy confusion

WASHINGTON (AP) — It's one part of the new health care law that seemed clear: free coverage for preventive care under most insurance plans.

Only it didn't turn out that way.

So on Wednesday, the Obama administration had to straighten out the confusion.

Have you gone for a colonoscopy thinking it was free, only to get a hefty bill because the doctor removed a polyp?

No more.

Taking out such precancerous growths as part of a routine colon cancer screening procedure will now be considered preventive care.

"Polyp removal is an integral part of a colonoscopy," the Department of Health and Human Services said in guidance posted on its website. That conclusion has the backing of several leading medical societies, the department noted.

Also addressed in the notice was genetic testing for breast cancer, coverage of over-the-counter products such as aspirin for heart care and nicotine patches for smoking, and birth control for women. Unlike formal regulations, the guidance does not have the force of law, but advocates for patients say insurers would be ill-advised to ignore it.

President Barack Obama's health care law required most private health plans to cover preventive care at no additional charge to patients. It also expanded preventive coverage without copayments for Medicare recipients. For workers and their families, the expense is borne by the company health plan, which passes on some of those costs in the form of higher premiums. Advocates say preventive care saves the health care system money over time.

Colonoscopy is an expensive test that can cost more than $1,000. It's recommended for adults 50 and over, and has become a rite of passage for aging baby boomers.

News that it would be covered free under the health care law got attention, but that was followed quickly by a letdown when many insurers started charging if a polyp or two was discovered and removed during the procedure.

"Insurers were reclassifying it from a preventive test to a diagnostic procedure," said Stephen Finan, policy director for the American Cancer Society Cancer Action Network. "In some cases the cost-sharing was a significant amount of money."

His group was among several that complained to the administration.

Other free preventive services addressed in Wednesday's guidance:

—Insurers must cover testing, if ordered by a doctor, for rare BRCA genes that dramatically increase the risk of breast cancer. Such tests can cost as much as $3,000.

—Over-the-counter products such as aspirin for heart care and nicotine patches for smoking cessation are covered with a doctor's prescription.

—Insurers won't be able to fulfill the law's requirement to cover contraception as preventive care for women if they only pay for birth control pills. A full range of FDA-approved methods must be covered, including long-acting implant and intrauterine devices. Birth control methods for men are not covered as preventive care.

If a health plan does not have a network doctor who performs a particular preventive service, a patient can see a doctor out-of-network without facing copays or additional charges.

Also Wednesday, the government came out with final rules on the benefits that health plans catering to individuals and small businesses will have to offer starting next year, when new insurance markets called exchanges open in each state.

The coverage generally is better than what's now available to people buying individual policies, but close to what medium-size companies offer, with some important improvements in areas such as mental health care.

Benefits include hospital and outpatient care, emergency services, maternity and newborn care, prescriptions, prevention, rehabilitation and ongoing assistance for people with potentially disabling conditions, and dental and vision care for children.

All plans will have to cover the same benefits, but their premiums and cost sharing will vary. There will be four level of coverage — bronze, silver, gold and platinum. Bronze plans will cover 60 percent of expected costs while platinum plans will cover 90 percent.

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Online:

Health and Human Services Department: http://tinyurl.com/au6lzeo

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Wall Street ends down sharply after Fed minutes

DEAR ABBY: My boyfriend, "Doug" (24), and I (22) have been in a long-distance relationship for a year, but we were friends for a couple of years before that. I had never had a serious relationship before and lacked experience. Doug has not only been in two other long-term relationships, but has had sex with more than 15 women. One of them is an amateur porn actress.I knew about this, but it didn't bother me until recently. Doug had a party, and while he was drunk he told one of his buddies -- in front of me -- that he should watch a certain porn film starring his ex-girlfriend. ...

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