FDA halts Amgen study after teen patient death


WASHINGTON (AP) — Federal health regulators say they have halted Amgen's studies of its thyroid drug Sensipar after the death of a 14-year-old patient in a company trial.


The Food and Drug Administration says it is gathering information about the death, but has shut down all studies of the drug in children.


Sensipar is approved for adults to treat over-activity of the parathyroid gland. Amgen Inc. had been studying the drug to see whether it works in children.


The FDA says in a statement it is unclear whether Amgen's drug had a role in the patient's death, but it is reminding doctors to prescribe it carefully.


The agency says doctors should monitor patients' calcium levels to make sure they don't fall to dangerous levels.


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Wall Street rebounds as Bernanke defends policy

NEW YORK (Reuters) - Stocks climbed on Tuesday, rebounding from their worst decline since November after Federal Reserve Chairman Ben Bernanke defended the Fed's bond-buying stimulus before Congress.


Bernanke, in testimony before the Senate Banking Committee, strongly defended the Fed's bond-buying stimulus program and quieted rumblings that the central bank may pull back from its stimulative policy measures, which were sparked by the release of the Fed minutes last week.


Bernanke's testimony helped ease concerns about a stalemate in Italy after a general election failed to give any party a parliamentary majority, posing the threat of prolonged instability and financial crisis in Europe, and sending the S&P 500 to its worst decline since early November in the previous sessions.


Bernanke "certainly said everything the market needed to feel in order to get comfortable again," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.


"The fear is we were going to see a rollover, and the first shot over the bow was what we saw out of Italy yesterday with the elections," Kenny said. "When it came to U.S. markets, we saw some of that bleeding stop because our focus shifted from the Italian political circus to Ben Bernanke."


Gains in homebuilders and other consumer stocks, following strong economic data, lifted the S&P 500 and a 5.6 percent jump in Home Depot to $67.38 boosted the Dow industrials. The PHLX housing sector index <.hgx> rose 3.3 percent.


However, the central bank chairman also urged lawmakers to avoid sharp spending cuts set to go into effect on Friday, which he warned could combine with earlier tax increases to create a "significant headwind" for the economic recovery.


The Dow Jones industrial average <.dji> climbed 109.04 points, or 0.79 percent, to 13,893.21. The Standard & Poor's 500 Index <.spx> gained 8.96 points, or 0.60 percent, to 1,496.81. The Nasdaq Composite Index <.ixic> advanced 13.46 points, or 0.43 percent, to 3,129.71.


Despite the bounce, the S&P 500 also failed to move above 1,500, a closely watched level that was technical support until recently, but it could now become a hurdle.


The uncertainty caused by the Italian elections continues to weigh on stocks in Europe. The FTSEurofirst-300 index of top European shares <.fteu3> closed down 1.4 percent. The benchmark Italian index <.ftmib> tumbled 4.9 percent.


Home Depot gave the biggest boost to the Dow and provided one of the biggest lifts to the S&P 500 after the world's largest home improvement chain reported adjusted earnings and sales that beat expectations. The stock climbed 5.6 percent to $67.47.


Macy's shares gained 3.6 percent to $39.90 after the department-store chain stated it expects full-year earnings to be above analysts' forecasts because of strong holiday sales.


Economic reports that showed strength in housing and consumer confidence also supported stocks. U.S. home prices rose more than expected in December, according to the S&P/Case-Shiller index. Consumer confidence rebounded in February, jumping more than expected, and new-home sales rose to their highest in 4-1/2 years.


(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)



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Top British Cardinal Resigns After Accusations of ‘Inappropriate Acts’





VATICAN CITY — Britain’s most senior Roman Catholic cleric announced his resignation on Monday, a day after being accused of “inappropriate acts” with priests, saying he would not attend the conclave to elect a new pope.




The cleric, Cardinal Keith O’Brien, said that he had submitted his resignation months ago, and that the Vatican said Pope Benedict XVI had accepted it on Feb. 18. However, the timing of the announcement — a day after news reports of alleged abuse appeared in Britain — suggested that the Vatican had encouraged the cardinal to stay away from the conclave,


“Everybody’s been struck by how quickly Rome responded,” said Austen Ivereigh, director of the British church advocacy group Catholic Voices. “Clearly Rome saw that there was sufficient substance to the allegations. They would not have told him to stand down unless they thought there was something worth investigating.”


The move leaves Britain without a voting cardinal in the conclave, and is bound to raise questions about other cardinals. It comes amid a campaign by some critics to urge Cardinal Roger M. Mahony of Los Angeles not to attend the conclave because of his role in moving priests accused of abuse to other parishes.


It also comes just days after the Vatican Secretariat of State issued a harsh statement against recent news media reports, including ones alleging a gay sex scandal inside the Vatican. It said that cardinals should not be affected by external pressures when they vote for the next pope. About 115 cardinals are expected to be at the gathering. Cardinal Cormac Murphy-O’Connor, the former archbishop of Westminster, will attend the meetings in Rome before the conclave, according to Mr. Ivereigh, the cardinal’s former spokesman, but is past the voting age cutoff of 80 years.


Vatican watchers said that Cardinal O’Brien’s decision not to attend the conclave was rare.


“It’s quite unprecedented,” said Sandro Magister, a Vatican expert with the Italian weekly L’Espresso. “He made it clear that his resignation came under the pressure of the accusations. His certainly isn’t a frequent case and hasn’t happened in conclaves in recent memory.”


On Monday, Benedict changed the laws governing the conclave to allow cardinals to move up the start date before the traditional 15-to-20-day waiting period after the papacy is vacant. He also met with three cardinals who had conducted a secret investigation into a scandal over leaked documents and ruled that the contents of their report would be known only to his successor, not to the cardinals entering the conclave.


Cardinal O’Brien’s announcement came a day after The Observer reported that four men had made complaints to the pope’s diplomatic representative in Britain, Antonio Mennini, the week before Pope Benedict XVI announced on Feb. 11 that he would be stepping down as of Feb. 28.


The Observer said that the accusations, which dated back to the 1980s, had been forwarded to the Vatican.


Last week, Cardinal O’Brien drew different headlines, telling the BBC that the next pope should consider abandoning the church’s insistence on priestly celibacy, and suggesting that it might be time for the papal conclave to choose a pontiff from Africa or Asia, where church membership has been growing even as it has fallen across Europe and North America.


On Monday, the Vatican spokesman, the Rev. Federico Lombardi, played down the connection between the media reports and Cardinal O’Brien’s resignation, which the pope accepted under a norm of church law that says he had reached the normal retirement age of 75.


A statement issued by the media office of the Roman Catholic Church in Scotland said Cardinal O’Brien had informed the pope some time ago of his intention to resign as archbishop of St. Andrews and Edinburgh as his 75th birthday approached on March 17, but that no date had been set.


The cardinal said in the statement, “The Holy Father has now decided that my resignation will take effect today, 25 February 2013.”


“Looking back over my years of ministry: For any good I have been able to do, I thank God,” he said. “For any failures, I apologize to all whom I have offended.”


“I also ask God’s blessing on my brother cardinals who will soon gather in Rome,” the statement said, adding: “I will not join them for this conclave in person. I do not wish media attention in Rome to be focused on me — but rather on Pope Benedict XVI and on his successor.”


Rachel Donadio reported from Rome and John F. Burns from London. Alan Cowell contributed reporting from London and Laurie Goodstein from New York.



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Which Oscars Diva Had the Biggest Musical Moment?















02/25/2013 at 02:55 PM EST







From left: Jennifer Hudson, Adele, Barbra Streisand, Shirley Bassey and Kristin Chenoweth


WireImage; Landov; AP; Getty; AP


It was a great night for music at the Academy Awards on Sunday – particularly for the ladies.

But who really knocked it out of the park?

Jennifer Hudson's performance of "And I Am Telling You I'm Not Going" brought the audience to its feet, while Barbra Streisand delivered a wonderful tribute to Marvin Hamlisch with her rendition of "The Way We Were."

Then there were the Bond girls.

Dame Shirley Bassey wowed the crowd with the James Bond classic "Goldfinger." Then Adele sang "Skyfall," which earned her the Oscar for best song this year.

Closing out the evening was Kristin Chenoweth, who got the better of host Seth MacFarlane in a salute to the evening's losers.

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Mediterranean-style diets found to cut heart risks


Pour on the olive oil, preferably over fish and vegetables: One of the longest and most scientific tests of a Mediterranean diet suggests this style of eating can cut the chance of suffering heart-related problems, especially strokes, in older people at high risk of them.


The study lasted five years and involved about 7,500 people in Spain. Those who ate Mediterranean-style with lots of olive oil or nuts had a 30 percent lower risk of major cardiovascular problems compared to those who were told to follow a low-fat diet but who in reality, didn't cut fat very much. Mediterranean meant lots of fruit, fish, chicken, beans, tomato sauce, salads, and wine and little baked goods and pastries.


Mediterranean diets have long been touted as heart-healthy, but that's based on observational studies that can't prove the point. The new research is much stronger because people were assigned diets to follow for a long time and carefully monitored. Doctors even did lab tests to verify that the Mediterranean diet folks were consuming more olive oil or nuts as recommended.


Most of these people were taking medicines for high cholesterol and blood pressure, and researchers did not alter those proven treatments, said one study leader, Dr. Ramon Estruch of Hospital Clinic in Barcelona.


But as a first step to prevent heart problems, "we think diet is better than a drug" because it has few if any side effects, Estruch said. "Diet works."


Results were published online Monday by the New England Journal of Medicine and were discussed at a nutrition conference in Loma Linda, Calif.


People in the study were not given rigid menus or calorie goals because weight loss was not the aim. That could be why they found the "diets" easy to stick with — only about 7 percent dropped out within two years. There were twice as many dropouts in the low-fat group than among those eating Mediterranean-style.


Researchers also provided the nuts and olive oil, so it didn't cost participants anything to use these relatively pricey ingredients. The type of oil may have mattered — they used extra-virgin olive oil, which is minimally processed and richer than regular or light olive oil in the chemicals and nutrients that earlier studies have suggested are beneficial.


The study involved people ages 55 to 80, just over half of them women. All were free of heart disease at the start but were at high risk for it because of health problems — half had diabetes and most were overweight and had high cholesterol and blood pressure.


They were assigned to one of three groups: Two followed a Mediterranean diet supplemented with either extra-virgin olive oil (4 tablespoons a day) or with walnuts, hazelnuts and almonds (a fistful a day). The third group was urged to eat a low-fat diet heavy on bread, potatoes, pasta, rice, fruits, vegetables and fish and light on baked goods, nuts, oils and red meat.


Independent monitors stopped the study after nearly five years when they saw fewer problems in the two groups on Mediterranean diets.


Doctors tracked a composite of heart attacks, strokes or heart-related deaths. There were 96 of these in the Mediterranean-olive oil group, 83 in the Mediterranean-nut group and 109 in the low-fat group.


Looked at individually, stroke was the only problem where type of diet made a big difference. Diet had no effect on death rates overall.


The Mediterranean diet proved better even though its followers ate about 200 calories more per day than the low-fat group did. The study leaders now are analyzing how each of the diets affected weight gain or loss and body mass index.


The Spanish government's health research agency initiated and paid for the study, and foods were supplied by olive oil and nut producers in Spain and the California Walnut Commission. Many of the authors have extensive financial ties to food, wine and other industry groups but said the sponsors had no role in designing the study or analyzing and reporting its results.


Rachel Johnson, a University of Vermont professor who heads the American Heart Association's nutrition committee, said the study is very strong because of the lab tests to verify oil and nut consumption and because researchers tracked actual heart attacks, strokes and deaths — not just changes in risk factors such as high cholesterol.


"At the end of the day, what we care about is whether or not disease develops," she said. "It's an important study."


Rena Wing, a weight-loss expert at Brown University, noted that researchers provided the oil and nuts, and said "it's not clear if people could get the same results from self-designed Mediterranean diets" — or if Americans would stick to them more than Europeans who are used to such foods.


Dr. George Bray of the Pennington Biomedical Research Center in Baton Rouge, La., said he would give the study "a positive — even glowing — comment" and called it "the best and certainly one of the largest prospective dietary trials ever done."


"The data are sufficiently strong to convince me to move my dietary pattern closer to the Mediterranean Diet that they outline," he added.


Another independent expert also praised the study as evidence diet can lower heart risks.


"The risk reduction is close to that achieved with statins," cholesterol-lowering drugs, said Dr. Robert Eckel, a diet and heart disease expert at the University of Colorado.


"But this study was not carried out or intended to compare diet to statins or blood pressure medicines," he warned. "I don't think people should think now they can quit taking their medicines."


___


Online:


Journal: http://www.nejm.org


___


Marilynn Marchione can be followed at http://twitter.com/MMarchioneAP


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Wall Street drops on Italian election uncertainty

NEW YORK (Reuters) - Stocks fell on Monday, reversing course from earlier gains as elections in Italy stoked concerns a divided parliament could disrupt the country's fiscal reforms and the euro zone's stability.


Early forecasts of the results were conflicting, as opinion polls indicated the center-left of Pier Luigi Bersani winning the lower house, but projections from RAI state television showed Silvio Berlusconi's center right in front in the Senate - which has equal lawmaking power - but unable to form a majority.


The resulting gridlock in parliament could force new elections and sent the euro currency lower against both the dollar and yen.


"Most likely we are looking at a second election, so it's delayed, but at the margin it is a negative," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.


"The question is, what happens with Italy and that uncertainty is out there, that is really what you've seen in the sell-off here."


Earlier polls pointing to a center-left victory boosted stocks in Milan and other European markets, as well as helping to lift the S&P 500 to a session high of 1,525.84 on optimism Italy would continue to pay down its debt.


However, the benchmark S&P index remained near highs not seen in five years, as bets on a stronger U.S. economy have given equities support. The S&P 500's slight fall last week was the first weekly drop after a seven-week string of gains to start the year.


Banks and other financial stocks were among the worst performers on worries about the sector's exposure to Italy's massive debt. The KBW Bank Index <.bkx> fell 1.1 percent.


The Dow Jones industrial average <.dji> dropped 92.14 points, or 0.66 percent, to 13,908.43. The Standard & Poor's 500 Index <.spx> dropped 11.65 points, or 0.77 percent, to 1,503.95. The Nasdaq Composite Index <.ixic> dropped 12.65 points, or 0.40 percent, to 3,149.17.


Barnes & Noble Inc shares jumped 10.6 percent to $14.94 after the bookseller's chairman offered to buy its declining retail business.


The Nasdaq received support from Amgen Inc , up 4.9 percent at $91.03, after rival Affymax issued a voluntary recall of its only drug, an anemia treatment that competes with Amgen's top-selling red blood cell booster, Epogen. Affymax shares slumped 84.6 percent to $2.55.


The FTSEurofirst-300 index of top European shares <.fteu3> unofficially closed up 0.04 percent and Italy's main FTSE MIB <.ftmib> ended up 0.7 percent after earlier gaining near 4 percent.


U.S. equities will face a test with the looming debate over so-called sequestration, U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement over spending and taxes. The White House issued warnings about the harm the cuts are likely to inflict on the economy if enacted.


"Sitting out there is the one thousand pound gorilla - the sequester issue - and certainly nothing is happening there," Ghriskey said.


Lowe's Companies Inc lost 1.6 percent to $37.08 after the home improvement retailer posted fourth-quarter earnings.


With 83 percent of the S&P 500 companies having reported results so far, 69 percent beat profit expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data.


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.


(Editing by Kenneth Barry, Jan Paschal and Nick Zieminski)



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Letter From Washington: A Struggle for Control of Republican Party







WASHINGTON — The late William F. Buckley and Karl Rove have little in common, other than the Republican Party and intelligence. Mr. Buckley’s politics were guided by principles; Mr. Rove’s principles are guided by politics.




Yet Mr. Rove, the party establishment’s money and strategy guru, is channeling Mr. Buckley, a founding father of contemporary conservatism, by trying to root out extremism from the Republican mainstream. A half-century ago, Mr. Buckley sought to expunge the John Birch Society, anti-Semites and white supremacists from the party’s inner circles. Today, Mr. Rove is threatening to finance primary campaigns against those he considers right-wing extremists of the type that have already cost Republicans several Senate seats.


It may be the right purpose, but he’s the wrong person. He can’t avoid looking like an inside-the-Beltway kingmaker trying to purge populist insurgencies around the country and make some more bucks while doing it. There is a backlash.


Still, prominent Republicans with more credibility than Mr. Rove need to consider this cause. There are more than a few fringe figures who play a role in defining the party, many of them express a vitriolic dislike of President Barack Obama that turns off possible Republican voters.


There is Representative Steve King of Iowa, who is unrelenting in his criticism of the president. One of his latest targets is the September attack in Benghazi, Libya, in which four Americans, including the U.S. ambassador, were killed.


He goes further than other critics: Benghazi, he declares, “is a lot bigger” than other scandals. It is, he says, at least 10 times bigger than Watergate and Iran-contra combined.


Mr. King has made a name for himself with anti-immigrant rants. Last year, he said Americans should select eligible immigrants the same way they would go about picking a “good bird dog.” That means choosing “the one that’s the friskiest, the one that’s engaged the most, and not the one that’s over there sleeping in the corner.” He later explained that he meant this as a compliment — he likes bird dogs.


Then there’s Representative Paul C. Broun of Georgia. The former physician said evolution, embryology and the Big Bang theory are “lies straight from the pit of hell.” He once proposed banning Playboy magazine from military installations, which might have jeopardized the survival of the all-volunteer army.


Like more than a few of his colleagues on the right, he directs his greatest vitriol at Mr. Obama. Mr. Broun boasts that he was the first to call the president “a socialist who embraces Marxist-Leninist policies.” The “only Constitution that Barack Obama upholds is the Soviet constitution,” he charges.


These two lawmakers aren’t simply innocuous backbenchers. They are among the leading contenders in Republican primaries for open Senate seats in Georgia and Iowa.


Even some Republicans who aren’t as far out get caught up in the fervor, particularly when it touches on Mr. Obama. This month, Representative Virginia Foxx of North Carolina likened those who didn’t fight hard enough against the Obama administration’s regulation of for-profit colleges to Germans who didn’t stand up to the Nazis in the 1930s.


Texas, the biggest Republican-dominated state, is a hotbed of Obama-hating politicians. Louie Gohmert, in his fifth term in the U.S. House of Representatives, asserted in November that the president ousted the dictator Col. Muammar el-Qaddafi to allow Al Qaeda to take over Libya.


After a 15-year hiatus, Steve Stockman returned to the House this year and wasted no time. When the president appeared at a news conference surrounded by children after the school shooting in Newtown, Connecticut, Mr. Stockman compared Mr. Obama to Saddam Hussein for using children as props. He’s now talking about impeaching Mr. Obama for proposing gun-control legislation.


The Senate is hardly immune. Senator Ted Cruz of Texas, who was elected in November, questioned, with no cause, whether Chuck Hagel, the defense secretary nominee, had taken money from terrorist states. The comment was criticized even by the Republican senator John McCain, himself a Hagel critic. Far from expressing regret, Mr. Cruz seemed to revel in the controversy.


This transcends ideology. Mr. Broun has the least conservative voting record of any House Republican from Georgia, according to the latest National Journal survey of voting records. Claiming the president worships the constitution of the Soviet Union isn’t a conservative position — it’s a nutty one, reminiscent of the John Birchers that Mr. Buckley assailed a half-century ago.


Another new senator, Jeff Flake of Arizona, is every bit as conservative as Mr. Cruz, and they will probably vote alike most of the time. Yet Mr. Cruz revels in vilification, while Mr. Flake seeks common ground when possible.


It is the Flake persona that should offer the greatest appeal to younger or more independent voters. Many conservatives insist that the United States is a center-right country, where voters are receptive to the case for limited government and cultural traditionalism. The changing demographic profile of the electorate seems to undercut that case.


That is a good debate to have. But conservatives can’t compete in the argument when their party is identified with bizarre theories, bigotry and a visceral hatred of the president.


That’s going to change when prominent Republicans with conservative bona fides — Representative Paul D. Ryan of Wisconsin, Senator Marco Rubio of Florida — don’t just talk the talk about a broader-based party but walk the walk and reject the haters.


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All the Perks of an Oscars VIP





Want to know what Bradley, Jennifer and Anne will be eating, drinking and seeing on Oscar night? We'll show you










Updated: Friday Feb 15, 2013 | 11:40 AM EST
By: Kate Hogan




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FDA approves new targeted breast cancer drug


WASHINGTON (AP) — The Food and Drug Administration has approved a first-of-a-kind breast cancer medication that targets tumor cells while sparing healthy ones.


The drug Kadcyla from Roche combines the established drug Herceptin with a powerful chemotherapy drug and a third chemical linking the medicines together. The chemical keeps the cocktail intact until it binds to a cancer cell, delivering a potent dose of anti-tumor poison.


Cancer researchers say the drug is an important step forward because it delivers more medication while reducing the unpleasant side effects of chemotherapy.


"This antibody goes seeking out the tumor cells, gets internalized and then explodes them from within. So it's very kind and gentle on the patients — there's no hair loss, no nausea, no vomiting," said Dr. Melody Cobleigh of Rush University Medical Center. "It's a revolutionary way of treating cancer."


Cobleigh helped conduct the key studies of the drug at the Chicago facility.


The FDA approved the new treatment for about 20 percent of breast cancer patients with a form of the disease that is typically more aggressive and less responsive to hormone therapy. These patients have tumors that overproduce a protein known as HER-2. Breast cancer is the second most deadly form of cancer in U.S. women, and is expected to kill more than 39,000 Americans this year, according to the National Cancer Institute.


The approval will help Roche's Genentech unit build on the blockbuster success of Herceptin, which has long dominated the breast cancer marketplace. The drug had sales of roughly $6 billion last year.


Genentech said Friday that Kadcyla will cost $9,800 per month, compared to $4,500 per month for regular Herceptin. The company estimates a full course of Kadcyla, about nine months of medicine, will cost $94,000.


FDA scientists said they approved the drug based on company studies showing Kadcyla delayed the progression of breast cancer by several months. Researchers reported last year that patients treated with the drug lived 9.6 months before death or the spread of their disease, compared with a little more than six months for patients treated with two other standard drugs, Tykerb and Xeloda.


Overall, patients taking Kadcyla lived about 2.6 years, compared with 2 years for patients taking the other drugs.


FDA specifically approved the drug for patients with advanced breast cancer who have already been treated with Herceptin and taxane, a widely used chemotherapy drug. Doctors are not required to follow FDA prescribing guidelines, and cancer researchers say the drug could have great potential in patients with earlier forms of breast cancer


Kadcyla will carry a boxed warning, the most severe type, alerting doctors and patients that the drug can cause liver toxicity, heart problems and potentially death. The drug can also cause severe birth defects and should not be used by pregnant women.


Kadcyla was developed by South San Francisco-based Genentech using drug-binding technology licensed from Waltham, Mass.-based ImmunoGen. The company developed the chemical that keeps the drug cocktail together and is scheduled to receive a $10.5 million payment from Genentech on the FDA decision. The company will also receive additional royalties on the drug's sales.


Shares of ImmunoGen Inc. rose 2 cents to $14.32 in afternoon trading. The stock has ttraded in a 52-wek range of $10.85 to $18.10.


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Investors face another Washington deadline

NEW YORK (Reuters) - Investors face another Washington-imposed deadline on government spending cuts next week, but it's not generating the same level of fear as two months ago when the "fiscal cliff" loomed large.


Investors in sectors most likely to be affected by the cuts, like defense, seem untroubled that the budget talks could send stocks tumbling.


Talks on the U.S. budget crisis began again this week leading up to the March 1 deadline for the so-called sequestration when $85 billion in automatic federal spending cuts are scheduled to take effect.


"It's at this point a political hot button in Washington but a very low level investor concern," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. The fight pits President Barack Obama and fellow Democrats against congressional Republicans.


Stocks rallied in early January after a compromise temporarily avoided the fiscal cliff, and the Standard & Poor's 500 index <.spx> has risen 6.3 percent since the start of the year.


But the benchmark index lost steam this week, posting its first week of losses since the start of the year. Minutes on Wednesday from the last Federal Reserve meeting, which suggested the central bank may slow or stop its stimulus policy sooner than expected, provided the catalyst.


National elections in Italy on Sunday and Monday could also add to investor concern. Most investors expect a government headed by Pier Luigi Bersani to win and continue with reforms to tackle Italy's debt problems. However, a resurgence by former leader Silvio Berlusconi has raised doubts.


"Europe has been in the last six months less of a topic for the stock market, but the problems haven't gone away. This may bring back investor attention to that," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.


OPTIONS BULLS TARGET GAINS


The spending cuts, if they go ahead, could hit the defense industry particularly hard.


Yet in the options market, bulls were targeting gains in Lockheed Martin Corp , the Pentagon's biggest supplier.


Calls on the stock far outpaced puts, suggesting that many investors anticipate the stock to move higher. Overall options volume on the stock was 2.8 times the daily average with 17,000 calls and 3,360 puts traded, according to options analytics firm Trade Alert.


"The upside call buying in Lockheed solidifies the idea that option investors are not pricing in a lot of downside risk in most defense stocks from the likely impact of sequestration," said Jared Woodard, a founder of research and advisory firm condoroptions.com in Forest, Virginia.


The stock ended up 0.6 percent at $88.12 on Friday.


If lawmakers fail to reach an agreement on reducing the U.S. budget deficit in the next few days, a sequester would include significant cuts in defense spending. Companies such as General Dynamics Corp and Smith & Wesson Holding Corp could be affected.


General Dynamics Corp shares rose 1.2 percent to $67.32 and Smith & Wesson added 4.6 percent to $9.18 on Friday.


EYES ON GDP DATA, APPLE


The latest data on fourth-quarter U.S. gross domestic product is expected on Thursday, and some analysts predict an upward revision following trade data that showed America's deficit shrank in December to its narrowest in nearly three years.


U.S. GDP unexpectedly contracted in the fourth quarter, according to an earlier government estimate, but analysts said there was no reason for panic, given that consumer spending and business investment picked up.


Investors will be looking for any hints of changes in the Fed's policy of monetary easing when Fed Chairman Ben Bernake speaks before congressional committees on Tuesday and Wednesday.


Shares of Apple will be watched closely next week when the company's annual stockholders' meeting is held.


On Friday, a U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with the iPhone maker, blocking the company from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.


(Additional reporting by Doris Frankel; Editing by Kenneth Barry)



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