Washington stares down start of sequester cuts

NEW YORK, March 1 (Reuters) - The U.S. government hurtled today toward making deep spending cuts that threaten to hinder the nation's economic recovery, after Republicans and Democrats failed to agree on an alternative deficit-reduction plan.

The $85 billion in across-the-board “sequestration” cuts were expected to cause airport delays, disrupt public services and result in lower pay or layoffs for millions of government workers.

Locked in during a bout of deficit-reduction fever in 2011, the time-released cuts can only be halted by agreement between Republican lawmakers and the White House.

That has proved elusive so far.

Both sides still hope the other will either be blamed by voters for the cuts or cave in before the worst effects - like air traffic chaos or furloughs for tens of thousands of federal employees - start to bite in the coming weeks.

Barring any breakthroughs in the next few hours, the cuts will begin to come into force at some time before midnight on Friday night. The full brunt of the belt tightening, known in Washington as “sequestration,” will take effect over seven months so it is not clear if there will be an immediate disruption to public services.

President Barack Obama meets top leaders of Congress at the White House at 10 a.m. EST (1500 GMT) to explore ways to avoid the unprecedented, across-the-board cuts totaling $85 billion.

But expectations were low for a deal when the Democratic president huddles with Senate Majority Leader Harry Reid, Senate Republican leader Mitch McConnell, House of Representatives Speaker John Boehner, the top U.S. Republican, and House Democratic leader Nancy Pelosi.

Democrats insist tax increases be part of a solution to ending the automatic cuts, an idea Republicans reject.

“We should work together to reduce our deficit in a balanced way - by making smart spending cuts and closing special interest tax loopholes,” Obama said on Thursday.

Congress can stop the cuts at any time after they start on Friday if the parties agree to that. In the absence of any deal at all, the Pentagon will be forced to slice 13 percent of its budget between now and Sept. 30. Most non-defense programs, from NASA space exploration to federally backed education and law enforcement, face a 9 percent reduction.

The International Monetary Fund warns that the cutbacks could knock at least 0.5 percentage point off U.S. economic growth this year and slow the global economy.

The prospect of weaker growth and a jump in unemployment caused by the cuts was being seen by some in the markets as making it more likely the U.S. Federal Reserve will need to maintain its ultra lose monetary policy for longer.

“The market is of the view that if there's a fiscal tightening which causes a significant negative impact on economic prospects and the labor market, then the Fed will have to respond,” said Ian Stannard, head of European FX strategy at Morgan Stanley.

Financial markets have also had a long time to assess the potential impact of the cuts on growth and believe it is not tantamount to a recession trigger.

“There is no immediate and visible impact to the economy so markets are not seeing it as a tail risk,” said Ayako Sera, a market economist at Sumitomo Mitsui Trust Bank in Tokyo.

DISEASE RESEARCH, WEAPONS HIT

If the cuts were to stay in place through September, the administration predicts significant air travel delays due to layoffs of airport security workers and air traffic controllers.

Some Pentagon weapons production could grind to a halt and the budget cuts would ripple through the sprawling defense contracting industry.

Meat inspections could get hung up, medical research projects on cancer and Alzheimer's disease canceled or curtailed and thousands of teachers laid off.

Instead of these indiscriminate cuts, Obama and Democrats in Congress urge a mix of targeted spending cuts and tax increases on the rich to help tame the growth of a $16.6 trillion national debt.

Republicans instead want to cut the cost of huge social safety nets, including Social Security and Medicare, that are becoming more expensive in a country with an aging population.

Meantime, Obama is edging closer to having to enforce the meat-axe approach.

By midnight, he is required to issue an order to federal agencies to reduce their budgets and the White House budget office must send a report to Congress detailing the spending cuts. In coming days, federal agencies are likely to issue 30-day notices to workers who will be laid off.

STILL TIME ON THE CLOCK

The question now appears to be how long the budget cuts will be allowed to happen. If budget cuts last only a few weeks, it is plausible they could have a marginal impact on growth and on employment. This is because some budget cuts won't translate into immediate spending cuts.

The Defense Department, for example, will probably not begin furloughing some 800,000 civilian workers until late April, after which these workers will work one day less per week. Budget cuts for capital spending could also be delayed.

The CBO estimates that only about half of the $85 billion in budget cuts planned from March through September would translate into lower spending during that period.

Once the furloughs and other spending cuts take hold, though, workers will feel the pinch, especially the 2.8 million people employed by the federal government.

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Stock futures tick higher ahead of GDP, jobless data

NEW YORK (Reuters) - U.S. stock index futures edged higher on Thursday as investors were reluctant to make big bets following a sharp two-day rally and ahead of a rash of data.

Analysts said a pullback may be in store a day after major equity indexes posted their biggest daily advance since early January. Over the past two sessions, the S&P 500 has gained 1.9 percent, rising back above the closely watched level of 1,500.

Wall Street has largely resisted expectations it would undergo a correction, with the Dow Jones industrial average within striking distance of an all-time high. Recent gains were fueled by strong data and comments from Federal Reserve Chairman Ben Bernanke that showed continued support for the Fed's economic stimulus policy.

Revised gross domestic product data is expected to show that the U.S. economy grew 0.5 percent in the fourth quarter, rather than contracted 0.1 percent, as initially estimated. The data is due at 8:30 a.m. (1330 GMT), as are weekly jobless claims, which are seen dipping by 2,000 to 360,000 in the latest week.

"A rise in GDP is clearly part of the market's expectation at this point, and if it disappoints, there's a real risk to the downside," said Oliver Purshe, president of Gary Goldberg Financial Services in Suffern, New York.

Purshe noted that on February 18, about 80 percent of S&P 500 components were above their 50-day moving averages, a rate that has since dwindled to 60 percent.

"Market breadth has narrowed, and which suggests that a correction of as much as 5 to 6 percent is very likely."

While markets suffered steep losses earlier this week on concerns over European debt, they have since recovered and are little changed on the week.

Investors will also be keeping an eye on the debate in Washington over sequestration - U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement on spending and taxes. President Barack Obama and Republican congressional leaders arranged to hold last-ditch talks to prevent the cuts, but expectations were low that any deal would be produced.

"Investors have come to the realization that sequestration isn't the end of the world and that it will eventually be fixed," Pursche said. "But going into March the risk is that the economy slows down and disappoints investors."

S&P 500 futures rose 1.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 10 points and Nasdaq 100 futures rose 4.75 points.

For the month of February, the S&P 500 is up 1.2 percent, the Dow is up 1.6 percent and the Nasdaq is up 0.6 percent.

J.C. Penney Co Inc shares slumped 15 percent to $18.01 in premarket trading a day after it reported a steep drop in sales, prompting the department store to overhaul its pricing strategy. Groupon Inc also slumped on weak revenue, with the stock off 26 percent at $4.41 before the bell.

Sears Holding Corp rose 3.2 percent to $49 in premarket trading after it reported earnings and sales that beat expectations.

Tim Cook, chief executive of Apple Inc , acknowledged widespread disappointment Wednesday in the performance of the tech titan's stock, which is down 16.5 percent so far this year, but urged investors to take a long-term view on the company.

With 93 percent of the S&P 500 companies having reported results so far, 69.5 percent have beaten 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 6.2 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

U.S. stocks rallied on Wednesday, lifted by positive comments from U.S. Federal Reserve Chairman Ben Bernanke. Adding to the positive tone in markets were data showing robust pending home sales and a proxy for business spending plans that was stronger than expected.

(Editing by Bernadette Baum)

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Knicks overcome Curry's 54 to beat Warriors

NEW YORK (AP) — Stephen Curry rose for another jumper, and by then even the Knicks probably figured it would go in.

Curry had hardly missed in a scintillating second half of the NBA's most electric performance this season, the crowd cheering even before the ball left his hands.

This time, Raymond Felton jumped with him, making the play New York needed to finally withstand Curry.

Felton's blocked shot led to J.R. Smith's tiebreaking basket with 1:10 left, and the Knicks overcame Curry's NBA season-high 54 points to beat the Golden State Warriors 109-105 on Wednesday night.

Curry was 18 of 28 from the field, finishing one shy of the NBA record with 11 3-pointers in 13 attempts, in a performance that had the crowd hanging on his every shot. But the Knicks and Felton finally stopped him with 1:28 to play and the score tied at 105.

"My main thing is to keep playing. Like I said, once a guy gets it going like that, there's nothing I can really do. I've still got to stay in my mindset, still play my game, and I was still able to come up with some big plays at the end," Felton said. "We all came up with some big plays to get that win."

Carmelo Anthony followed Smith's basket with another one and the Knicks hung on to spoil former Knicks star and Warriors coach Mark Jackson's homecoming.

Anthony finished with 35 points and Smith had 26.

"We made the defensive stops we needed to make down the stretch," Knicks coach Mike Woodson said.

Playing all 48 minutes, Curry finished with seven assists and six rebounds while passing his previous career best of 42 points, and Kevin Durant's 52-point performance that had been the best in the NBA this season.

"I felt good all night. Obviously played the whole game, so was just trying to keep my legs underneath me on the offensive end, and you know, just stick to the game on the defensive end," Curry said. "Once I started seeing that 3-ball go down in transition, all sorts of spots on the floor, I knew it was going to be a good night."

But he had little help without All-Star forward David Lee, who was suspended one game for his role in an altercation Tuesday night in Indiana.

Tyson Chandler had 16 points and a career-best 28 rebounds for the Knicks, who won their second straight after a season-high, four-game losing streak. Amare Stoudemire had 14 points and Anthony added eight assists on the day the Knicks learned they could be without reserve forward Rasheed Wallace for the rest of the season because he needs surgery to repair a broken bone in his left foot.

Strutting all over the court whenever one of his 3s swished easily through the nets, Curry easily blew past the 38 points he scored Tuesday in Indiana, which had been his best of the season. That was spoiled when he was fined $35,000 for his role in the skirmish, which was essentially getting thrown to the ground by Roy Hibbert when he tried to intervene.

This performance — the most points by an NBA player in a loss since Kobe Bryant had 58 in a loss to Charlotte on Dec. 29, 2006 — was spoiled along with Jackson's trip back to his old home because of a few mistakes down the stretch.

Curry threw away a pass on the break with 3:13 left, and Jarrett Jack was called for a travel following Smith's go-ahead basket.

Plus, Klay Thompson finished 3 of 13 from the field, missing two straight from deep in the final minute.

Jackson, who grew up in Brooklyn and starred at St. John's before being drafted by the Knicks in 1987, didn't get a chance to coach here last season as an NBA rookie on the bench because of the lockout. He brought his wife, Desiree, to a road game for the first time this season, had his mother in the stands, and got a chance to see people he remembered from playing here years earlier.

He said he hadn't gotten to look ahead much to the game because of the schedule, but clearly enjoyed being back in Madison Square Garden once the day did arrive.

"This is a special place and it was part of my dreams as a kid," he said.

His night turned into Curry's, fans cheering even before the ball left his hand in the second half.

"We were short-handed and we needed a performance like that to have a chance," Jackson said. "He put on a clinic. Knocked down shots. Made plays. Carried us. Led us in rebounding. He did it all. I've seen a lot of great performances in this building and his goes up there. I've seen a lot. I've seen a lot, but that shooting performance was a thing of beauty."

The Knicks, who hadn't played since Sunday, looked ready to blow the Warriors out early, taking a 25-11 lead that the Warriors trimmed to 27-18 at the end of the first period before surging ahead behind Curry.

He scored 12 straight Golden State points, cutting it to 35-34 with his third 3-pointer of the second quarter. He followed Richard Jefferson's 3 with another one, giving the Warriors a 40-37 advantage. The Knicks recovered and went back ahead by nine late in the period before Curry answered with six consecutive points, and New York's lead was 58-55 at the break.

"He's a special young player with a very unique talent," Chandler said. "We ran everything at him. He just got hot. There was some shots that he couldn't have seen the rim."

Curry's drive gave the Warriors a two-point lead three minutes into the third quarter, but he didn't score again until hitting a turnaround 3 from 27 feet with 5 seconds left in the period, giving him 38 points again and cutting New York's lead to 84-81.

Already without Andrew Bogut because of a back injury, the Warriors had little size without Lee. Their lineup at one point in the second quarter had nobody taller than 6-foot-9 and Chandler simply climbed over them all night.

He came in leading the league with 4.4 offensive rebounds per game, and grabbed 13 boards in the first quarter alone.

Notes: Chandler was also the last NBA player to grab 13 rebounds in one quarter, hauling in 14 in the third quarter for Dallas on Dec. 1, 2010. ... Wallace, who hasn't played since December, will have surgery this week and the expected recovery time is eight weeks. Woodson said he didn't plan to waive the 38-year-old forward and create a roster spot, instead hoping he could be able to play in the postseason. ... Kenyon Martin, signed last week in part because of the uncertainty around Wallace, made his Knicks debut and was scoreless in 5 first-half minutes.

___

Follow Brian Mahoney on Twitter: http://www.twitter.com/Briancmahoney

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Taiwan ebullient over Ang Lee's Oscar

STORY HIGHLIGHTS

• Ang Lee's name beamed on building in Taiwan after Oscar win


• Lee, born in Taiwan, won award for best director for "Life of Pi"


• Lee's win created excitement in Taiwan and China, both claimed him as their own


• Ryan: "In some ways it feels like 'Linsanity' all over again"

Editor's note: Andrew Ryan is a host and producer at Radio Taiwan International, a government-owned station that broadcasts in several languages and countries. He first came to Taiwan in 1996 as a Fulbright scholar and has spent the last 16 years as a translator and observer of politics and culture.

Taipei (CNN) -- It's not every territory in the world that puts an Oscar-winning director's name up in lights on a towering building. But that's just the sort of thing that happens in Taiwan -- and it did on Monday night after Ang Lee picked up his second "Best Director" Oscar, this time for "Life of Pi."

The moment wasn't just celebrated in grand statements, but in small scenes played out in front of televisions across Taiwan when his name was announced.

I was at a TV station in Taipei that was broadcasting live coverage of the Oscars, working with a team of translators that was creating the subtitles for the rebroadcast. When Lee's name was announced the office erupted in applause. Down the hallway, more cheering could be heard.

READ: Oscar winners: Analysis of who won

I couldn't help but think back to the Athens Games in 2004, when Chen Shih-hsin won Taiwan's first ever Olympic gold medal (under the team name "Chinese Taipei"). Even veteran news anchors shed tears when the young taekwondo star defeated her Cuban rival.

It would be reductive to suggest that these displays of patriotism are simply the response of a small country that just doesn't crank out that many Oscar winners or Olympic golds. It also speaks of a place that has been largely marginalized in the international community.

Today, Taiwan has just 23 official diplomatic allies -- mostly other marginalized nations, in Central America and Africa. That's because China still sees Taiwan as part of its territory more than 60 years after the Chinese Nationalists retreated to the island at the end of a Civil War against the Communists. The Nationalists -- or Kuomintang -- are now the ruling party in a democratic Taiwan, which is officially called the Republic of China (ROC) -- not to be confused with the People's Republic of China on the Mainland.

Having lost its seat at the United Nations to the PRC in 1971, the ROC found itself with a diminished voice in the international community. It turned to manufacturing and technology in the 1980s, spurring on what is now referred to as an "economic miracle." Today, with its economy struggling to move past the global economic downturn, Taiwan has added the arts, sports, and even baking to its repertoire.

READ: Oscars 2013: Hollywood gets political

What's striking about Lee's win is that it's not just people in Taiwan who were quick to claim him as one of their own. In China, the state-run Xinhua news agency referred to him as "Chinese-American." While Taiwanese media latched onto the portion of Lee's acceptance speech when he thanked Taiwan and the central city of Taichung where much of the movie was filmed, Xinhua's main story included Lee's line of thanks to the 3,000 people who worked on the film for "believing this story and sharing this incredible journey with me."

In some ways it feels like "Linsanity" all over again, when Taiwan and China both claimed basketball star Jeremy Lin as their own, leaving the international media struggling to chart the dangerous waters of identity politics to correctly describe him.

VIEW: Photos from the red carpet

A very small voice at the fringe of the discussion wonders why it's important for people to know that Lin's paternal grandmother lives in Taiwan and referred to him as "a real Taiwanese," or that Lee grew up in Tainan and still loves to visit his favorite noodle shop there. Others in Taiwan question why a nation's confidence should be based on its success in the international community.

When Ang Lee's name was announced, the office erupted in applause. Down the hallway, more cheering could be heard.
Andrew Ryan

With China looming to the north, now the world's second biggest economy and wielding an influence that's verging on "superpower" status, the metaphor of Jonah and the whale comes to mind. The Taiwanese electorate is sharply divided on how it feels about the way ties with China have warmed ever since President Ma Ying-jeou first took office in 2008. The benefits are obvious, considering China is Taiwan's largest trade partner, but some worry that it could lead to a loss in autonomy.

INTERACTIVE: Oscars by numbers

The Ma administration has been mindful of the nationalistic rhetoric of the opposition, and although the president was born in Hong Kong, he has referred to himself in the past as "Taiwanese as well as Chinese." Ma was also quick to congratulate Lee following the Oscars, and to urge others to follow in the director's footsteps and "work hard at promoting Taiwan to the world."

Lee is just one name on a growing list of national heroes that both the government and the private sector have celebrated in recent years for putting Taiwan on the map: people like fashion designer Jason Wu, who moved to Canada from Taiwan and has created garments for U.S. First Lady Michelle Obama; master baker Wu Pao-chun, who beat the French patissiers at their own competition -- Les Masters de la Boulangerie in 2010; Yani Tseng, the world's number one female golfer; and even the humble vegetable seller-turned-philanthropist Chen Shu-chu, who was selected by Time Magazine as one of its heroes of 2010.

So what are people saying when they embrace these heroes as Taiwanese? They are saying "Taiwan may be small and diplomatically isolated, but it deserves to have a voice in the international community." While Lee may not speak about politics and no longer creates movies about Taiwan, he does have a voice and people do listen. And that's worth spreading in lights across the world's second-tallest building.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Andrew Ryan.

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Chicago archdiocese to close 5 schools in cost-cutting move

Budget cuts announced Wednesday by the Archdiocese of Chicago signal that the area's Roman Catholics are entering a period of austerity when there will be less money for their parishes and schools.

The cuts, which were officially announced as Cardinal Francis George and other leaders of the church gathered at the Vatican to select a new pope, include closing five schools, eliminating 75 positions at the archdiocese's headquarters and placing a moratorium on loans to parishes from the archdiocese bank for three years. Other changes include creating stricter guidelines for local parishes applying for subsidies and reducing the number of the agencies in the archdiocese.

George, who spoke publicly about the cuts when asked by reporters in Rome, said they are needed to address the archdiocese's chronic financial problems. The archdiocese has run deficits of more than $30 million annually over the last four years, including being $40 million in the red for the fiscal year ending in June 2012.

All told, the measures will save tens of millions of dollars over the next few years, officials said.

“The expenses have gone up, and the income is pretty well flat,” George said after a news conference in Rome about Pope Benedict XVI's last audience Wednesday in St. Peter's Square. “We tried to ride out the recession without making any changes — and we can't do that. We're giving more grants to parishes and schools that need more money. The budget is not balanced. Not just layoffs, but a lot of other things being done, other ways to use the resources we have.”

The archdiocese sold $150 million in bonds in 2012 that helped it get through a cash-flow problem, but ultimately that wasn't enough, George said. He hopes the cuts will enable the archdiocese to balance its budget in two years.

Although the cardinal's announcement made headlines, the archdiocese's financial situation has been no secret to its priests. Several clergymen said they knew the archdiocese had planned to scale back loans to parishes.

“We have already made adjustments,” said the Rev. Dennis Ziomek of St. Barbara Parish in Chicago's Bridgeport neighborhood. “We have to be responsible stewards with the money.”

In a letter posted on the archdiocese website, the cardinal thanked parishioners for their generosity and asked them to pray for the employees now out of a paycheck.

At the archdiocese's Pastoral Center headquarters on Wednesday, people funneled in and out of the building during their lunch breaks but declined comment on the layoffs. Before the announcement, staffers received memos asking them to report to their desks early Wednesday.

Of the 75 positions, 55 were full-time jobs. Sixty people were let go, while the remaining posts had been vacant. Those cuts are expected to save $11 million to $13 million annually by fiscal 2015, George wrote in his letter.

Employees who received pink slips will get job counseling, extended health benefits and generous severance packages.

“We're keeping up counseling for helping people find jobs, looking for places where they might look for jobs,” George said.

Along with the layoffs, the archdiocese will reduce the number of capital loans and grants it gives parishes, while creating “stricter criteria” for them to qualify for the financial assistance.

A Parish Transformation initiative in the works for at least two years will also try to save money by laying out measures to provide more financial stability, though the letter did not give details.

Those cuts are expected to save an additional $13 million to $15 million annually by fiscal 2015, the letter states.

By next year, the archdiocese will reduce its aid to Catholic schools by $10 million. It plans to give scholarships to children affected by the five school closings so they can attend nearby Catholic schools. Officials said low enrollment was a key factor for closing the schools: St. Gregory the Great High, St. Paul-Our Lady of Vilna Elementary and St. Helena of the Cross Elementary in Chicago, plus St. Bernardine in Forest Park and St. Kieran in Chicago Heights.

Now, Catholic schools will start relying on scholarships for student financial aid instead of grants from the archdiocese to make tuition affordable, Superintendent Sister Mary Paul McCaughey said.

She pointed to a new partnership with the Big Shoulders Fund, a charity supporting urban Catholic schools, that will help families pay for school with scholarships.

McCaughey did not expect tuition at other Catholic schools to immediately rise because grants from the archdiocese have been reduced. About two-thirds of schools already have posted their tuition rates for the upcoming school year, she added.

“Although things are challenged, I think (Chicago) is a Catholic community that's always supported its schools,” McCaughey said. “I think the support will be there.”

Outside of St. Bernardine Elementary in west suburban Forest Park, one of the schools that will close this summer, Maria Maxham said she was devastated when she heard last month that she'd have to send her children, one in second grade and the other in fourth grade, to a different school.

Maxham, who lives in Forest Park, said she is not sure the two will attend another local Catholic school because some lack what she thought was St. Bernardine's strength.

“There is so much diversity at St. Bernardine, and that's part of what makes it so fantastic,” Maxham said. “It was a special place and a second family for us.”

The school, which has been open since 1915, has about 100 students currently enrolled in its preschool-through-eighth-grade classrooms.

Administrators, teachers and parents were notified of the closing in January, when McCaughey led a meeting at the school and explained the large amount of money that the archdiocese needed to reduce from the schools budget, Principal Veronica Skelton Cash said.

One family left the school shortly after hearing the news, she added.

Cash, who joined the school in the fall, said there was much frustration among staff members afterward. Many believed they would have at least a few years to turn things around.

“I could see a lot of things changing for the better at this school,” Cash said. “The culture of the community is changing, and we were getting more and more inquiries about the school. There was momentum going forward.”

Current employees were given guidance on severance and benefits by the archdiocese's human resources officials, Cash said. Teachers without jobs will also be placed on a priority list for future employment with the archdiocese, she said.

“I'm incredibly disheartened,” said Daniel Kwarcinski, who hopes to find a job at another private school after teaching art for seven years at St. Bernardine. “There's a need for a school like this where we are at.”

In Rome, George said the decisions to let people go and reduce aid were not easy. But he reiterated that the archdiocese's financial situation drove the decision.

“We have to balance the budget, especially if it's precarious,” he said. “The growth being very slow means we can no longer ignore the kinds of deficit situations that have been imposed on us. We have to take action.”

Tribune reporter Manya A. Brachear reported from Rome, with Tribune reporters Bridget Doyle and Jennifer Delgado in Chicago.

mbrachear@tribune.com

bdoyle@tribune.com

jmdelgado@tribune.com

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Stock futures little changed ahead of Bernanke, data

NEW YORK (Reuters) - Stock index futures were little changed on Wednesday as investors awaited a second round of testimony in Congress by Federal Reserve Chairman Ben Bernanke for signs of whether the Fed will continue its economic stimulus program.

Economic data was also in focus with U.S. durables goods and homes data due out at 8:30 a.m. ET (1330) GMT and 10:00 a.m. ET (1500 GMT), respectively.

Bernanke is due to make his second appearance before the Financial Services Committee at 10:00 a.m. ET (1500 GMT).

A day earlier, Bernanke strongly defended the Fed's monetary stimulus efforts before Congress, easing financial market worries over an early retreat from the Fed's bond buying program, which had been triggered by minutes of the Fed's January meeting released a week ago.

His remarks, along with data showing sales of new homes hit a 4 1/2-year high, helped U.S. stocks rebound Tuesday from their worst decline since November.

Despite the bounce, the S&P 500 was unable to move back above 1,500, a closely watched level that was technical support until recently, but could now serve as a resistance point.

The S&P 500, up 6 percent for the year, was within reach of all-time highs a week ago before the minutes from the Fed's January meeting were released. Those minutes raised questions about the longevity of the Fed's economy-stimulating measures and since then, the benchmark S&P 500 has fallen 1 percent.

S&P 500 futures rose 2.5 points and were in line with fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 1 points while Nasdaq 100 futures rose 0.25 point.

In Europe, Italian debt prices and European stocks briefly rose after Italy sold the maximum amount of bonds it planned to offer in a debt auction though borrowing costs soared.

Italian 10-year yields fell 7 basis points to 4.83 percent while the Bund future was last 25 ticks up on the day at 145.15 after the sale.

The euro fell to $1.3098 from a session high of $1.3123 just before the results of the Italian bond auction were announced.

(Editing by Bernadette Baum)

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Minnesota takes down No. 1 Indiana 77-73

MINNEAPOLIS (AP) — Retaining that No. 1 national ranking has been elusive throughout this wild season in college basketball, and Indiana was the latest to lose at the top — again.

Most important and maybe more challenging for the Hoosiers, however, is holding on to first place in the tough-as-ever Big Ten.

Trevor Mbakwe had 21 points on 8-for-10 shooting and 12 rebounds to help Minnesota take down top-ranked Indiana 77-73 on Tuesday night, the seventh time the No. 1 team in the Associated Press poll has lost this season. Three of those losses were by the Hoosiers, who were No. 1 when they fell to Butler and Wisconsin earlier this season. All three opponents were unranked at the time.

Indiana (24-4, 12-3) has held the No. 1 ranking for 10 of the 17 polls by the AP this season, including the last four, and that will likely change next week. But fending off Michigan, Michigan State and Wisconsin is what's on the minds of the Hoosiers, who'll take a one-game lead in the conference race into Saturday's game against Iowa.

"Winning the Big Ten was going to be tough whether we won today or lost," said star guard Victor Oladipo, who had 16 points. "We knew it was going to be tough from the jump. Now it's even tougher. But I think my team is ready for it. We just have to go back and see what we did wrong and correct it."

Andre Hollins added 16 points for the Gophers (19-9, 7-8), who outrebounded Cody Zeller and the Hoosiers by a whopping 44-30 and solidified their slipping NCAA tournament hopes with an emphatic performance against the conference leader. The fired-up fans swarmed the court as the last seconds ticked off, the first time that's happened here since a 2002 win over Indiana.

"There were just too many times when that first shot went up and they were there before we were because we didn't get into their bodies," Hoosiers coach Tom Crean said. "We weren't physical enough on the glass. That's the bottom line."

Zeller, the second-leading shooter in the Big Ten, went 2 for 9. He had nine points with four turnovers. Minnesota had 40 points in the paint to Indiana's 22.

Mbakwe, a sixth-year senior, had a lot to do with that. While positing his conference-leading seventh double-double of the season, the 24-year-old Mbakwe was a man among boys in many ways in this game, dominating both ends of the court when the Gophers needed him most. He grabbed six of Minnesota's 23 offensive rebounds, two of them to keep a key possession alive. His off-balance put-back drew contact for a three-point play with 7:22 left that gave the Gophers a 55-52 lead.

Mbakwe was called for a loudly questioned blocking foul, his fourth, with 4:39 remaining on Zeller's fast-break layup and free throw that put the Hoosiers up 59-58. But Austin Hollins answered with a pump-fake layup that drew a foul for a three-point play and a two-point advantage for the Gophers.

The Hoosiers didn't lead again, and Joe Coleman's fast-break dunk with 2:35 left gave Minnesota a 68-61 cushion that helped it withstand a couple of 3-pointers by Christian Watford and one by Jordan Hulls in the closing minutes. That was the only basket Hulls made after halftime. He had 17 points.

"Just the way we bounced back is unbelievable. We showed that we can beat one of the best teams in the country. Now we have to build off this," said Mbakwe, whose team lost eight of its previous 11 games starting with an 88-81 loss at Indiana on Jan. 12. The Gophers were ranked eighth then. They didn't even receive a vote in the current poll. That could change next week.

The Hoosiers are still in position for their first outright Big Ten regular-season championship since 1993. With another home game against Ohio State on March 5, Indiana could still clinch the title before the finale at Michigan on March 10.

For now, though, the Hoosiers have to regroup and re-establish their inside game after the trampling in the post they endured here.

"They were relentless on the glass. We just didn't do a great job of boxing them out," Oladipo said.

___

Follow Dave Campbell on Twitter: http://www.twitter.com/DaveCampbellAP

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Yahoo CEO right to cut remote work?

STORY HIGHLIGHTS

• Raymond Fisman: Marissa Mayer needs to revive Yahoo, and face time at the office is key


• Fisman: Granted, this goes against Utopian vision of everyone working from cafes


• Fisman: In-person work means innovations, avoids misunderstood directives


• He says more jobs will get done and it'll encourage those who work in a half-empty office

Editor's note: Raymond Fisman is the Lambert Family professor of social enterprise at the Columbia Business School. He is the co-author, with Tim Sullivan, of "The Org: The Underlying Logic of the Office."

(CNN) -- When Yahoo's relatively new CEO Marissa Mayer decreed that workers would be required to show up at the office rather than work remotely, the immediate backlash from outsiders was mostly on the side of the angry Yahoo employees who were losing the comfort and convenience of telecommuting. Inside the company, reactions were mixed.

It struck a deep chord, contrary as it was to the techno-utopian impulse that has helped define Silicon Valley: the idea that someday soon we'll all be working in coffee shops or at kitchen tables, with broadband connections replacing in-person interactions.

Mayer may have been extreme in her demands for face time at the office, but it's the right call for a leader who is working to turn around one of the Internet's laggards.

Raymond Fisman

First, let's consider what's at stake for the company and what Mayer is hoping to accomplish. Yahoo is famous for having bungled its position as a one-time Internet leader. Mayer was brought on specifically to revitalize the benighted company after the departure of Jerry Yang; the firing of Carol Bartz, and the departures of another CEO who inflated his resume and an interim director. All the while, Yahoo has been a company in search of a direction.

What does the end of telecommuting have to do with giving the company a sound footing? The reasons go well beyond the obvious issue of reining in slackers who have taken advantage of Yahoo's reportedly lax monitoring of work done from home.

Talk Back: Is Yahoo wrong to end telecommuting?

Jackie Reses, Yahoo's head of human relations, has it exactly right in the memo she wrote to employees about the policy: Personal interaction is still the most effective way of conveying a company's direction, and keeping tabs on what different parts of the organization are up to. And that's what Mayer has to do with all of Yahoo's 11,500 employees to succeed.

What do in-person meetings accomplish that e-mail can't? Part of the answer lies in time use surveys of CEOs that go back nearly 40 years.

Management scholar Henry Mintzberg was among the first to track how top managers spend their time in the early 1970s. Much to his surprise, he found that around 80% of their time was spent in face-to-face meetings; the subjects of his study had few stretches of more than 10 minutes at a time to themselves.

More recent time use studies by researchers at Harvard, the London School of Economics and Columbia have found that little has changed. Despite the IT revolution, business leaders still spend 80% of their time in face-to-face meetings.

The reason is that there's only so much that one can glean from a written report or a spreadsheet. To cut through the hidden agendas, and office politics, most of the time you need to look someone in the eye and ask them, "Really? How exactly would that work?" It is this probing and questioning that allows effective managers to gather the scraps of information needed to understand what's really going on.

Similarly, all the way down the organizational chart, person-to-person interactions are crucial to ensure that an organization's change of direction isn't misrepresented or garbled in its retelling.

The bland proclamations made in reports and e-mails are given clearer meaning through the way they're communicated in the "high fidelity" that only personal interaction will allow. In-person meetings can also help teams avoid misunderstandings: As one of our friends who runs a virtual workplace puts it, with e-mail exchanges alone, everyone starts to get a bit paranoid.

Finally, the Yahoo memo notes that it's hard to innovate via e-mail exchanges or the occasional agenda-filled meeting. New ideas spring up through chance encounters in the cafeteria line and impromptu office meetings. It's an assertion that's backed up by academic research highlighting the importance of physical proximity in driving scientific progress.

Work at home? Share productivity tips

Yet there are rarely benefits without cost. Lots of tasks are easily managed from a distance. A large number of the affected Yahoo employees are customer-service representatives who aren't going to be driving innovation at the company anyway.

In one study of telecommuting at a Chinese online travel agency, customer-service reps were both happier and more productive when working from home -- probably Yahoo service reps aren't any different from their Chinese counterparts in this regard. And every Yahoo employee surely has some aspects of their jobs that could be done just as well at the kitchen table as in an office cubicle.

But it's hard to create a norm of "physically together" if the office is always half-empty. And once it becomes that way, the half that have been showing up will be less and less inclined to bother. Finally, such a shocking and provocative directive will most certainly have the effect of imbuing the organization with the sense of urgency it needs to get the job done.

Will Yahoo employees come around to appreciating the change? Not necessarily the ones that liked to sleep in or work on a startup on Yahoo's dime, but it may be welcomed by the ones already showing up. Will it be damaging to morale? Possibly, though it may help Yahoo employees to remember that, if they're successful, the change is likely to be temporary.

But the job of the CEO isn't to maximize worker happiness. It's to make sure they get their jobs done. And in driving change at Yahoo, Mayer thinks they need to show up at the office.

Follow @CNNOpinion on Twitter.

Join us at Facebook/CNNOpinion.

The opinions in this commentary are solely those of Raymond Fisman.

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Winter storm: Lingering snow could mean messy commute

Tom updates Tuesday's storm. (WGN - Chicago)

The storm that socked the Chicago area with the season's biggest snowfall has tapered off, but it's not completely finished with us.

Snow will continue falling periodically today, dropping another inch or two in the city and up to three inches in the northern suburbs, according to the National Weather Service.

That means the morning rush hour could be a bit messy, though it shouldn't be nearly as bad as Tuesday evening's commute was for motorists like Bob Reed of Geneva. Speaking from a cellphone as he crawled west on Interstate 90, Reed blamed sloppy drivers more than sloppy roads.

"When it snows like this, it's like there are no traffic laws at all," Reed said. "Normally we have very aggressive drivers, but now we've got people going the wrong way down one-way streets, people jumping out of line to pass you."

The northern suburbs were hit hardest by the storm, with Waukegan reporting 11 inches of snow accumulation.

By midnight, 4.8 inches had fallen at O'Hare International Airport, according to the National Weather Service. That brought the official total for the season to 18.4 inches, and February's total to 14.9 inches.

Many city and suburban schools closed early and canceled sports games and practices. By 9 p.m., more than 500 departing flights had been canceled at O'Hare and Midway airports, with about the same number of arrivals also canceled, according to FlightStats, which gathers data from airports and airlines.

Cars and buses slid into ditches and crashed into each other on slick roads. The Illinois Tollway and Chicago's Department of Streets and Sanitation dispatched their full fleets of snowplows and salt trucks.

Snow fell at about 2 inches an hour in some northern suburbs. Any snow Wednesday or the rest of the week won't be nearly that intense, said meteorologist Casey Sullivan of the National Weather Service. Leaving early for the morning commute, however, won't be a bad idea, he said.

In a winter of sparse snowfall, some welcomed the storm with enthusiasm — particularly those who stand to profit from it. James Koch, the owner of Jimbo's Plowing Service in Tinley Park, said the snow was a gift in a winter that's been a bust for plow truck drivers.

Koch bought a new truck and plow after the record snowfall during the 2011 Groundhog Day blizzard. Since then he has failed to realize the returns he expected on his investment, he said.

"It ain't like what it used to be," Koch said. "Chicago always had a good snowfall, and now we're not getting snow until January. If you don't get a big snow in December in this business, you're basically playing catch-up all year."

The snow also gave fresh life to plans for winter recreation. Gloria Morison, of Highland Park, was at a brunch Tuesday morning when she saw the first flakes fall. She said she immediately started making plans to try out a new pair of cross country skis, thinking she could go down her street before the plows came to get to the Green Bay Trail.

Chicago Transit Authority buses had a hard time navigating some roads Tuesday. A few buses got stuck near North Stockton Drive and West Dickens Avenue, police said.

"Obviously, we're advising operators to drive with caution," CTA spokeswoman Lambrini Lukidis said.

With snow forecast to fall periodically Wednesday and Thursday, drivers should continue to heed that advice, said Sullivan of the weather service. Even after the storm passes there could be more in store, with unrelated lake-effect snow possible Friday, he said.

"We'll see."

Tribune reporters Ryan Haggerty and Naomi Nix contributed.

ehirst@tribune.com

jhuston@tribune.com

agrimm@tribune.com

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Iran upbeat on nuclear talks, West wary

ALMATY (Reuters) - Iran gave an upbeat assessment of two days of nuclear talks with world powers that ended on Wednesday, but Western officials said Tehran must start taking concrete steps to ease mounting concerns about its atomic activity.

The first negotiations between Iran and six world powers in eight months ended without a breakthrough in Almaty, but they agreed to meet again at expert level in Istanbul next month and resume political discussions in the Kazakh city on April 5.

Israel, assumed to be the Middle East's only nuclear-armed power, is watching the talks closely. It has strongly hinted it might attack Iran if diplomacy and sanctions fail to stop it from acquiring nuclear weapons. Iran denies any such aim.

Iran's foreign minister said he was optimistic an agreement could be reached with the powers - the United States, France, Russia, Britain, Germany and China - on the country's disputed nuclear program.

"Very confident," Ali Akbar Salehi told Reuters when asked on the sidelines of a U.N. conference in Vienna how confident he was of a positive outcome.

The six powers offered at the February 26-27 Almaty meeting to lift some sanctions if Iran scaled back nuclear activity that the West fears could be used to build a bomb.

Tehran, which says its program is entirely peaceful, did not agree to do so and the sides did not appear any closer to a deal to resolve a decade-old dispute that could lead to another war in the Middle East if diplomacy fails.

But Iran still said the talks were a positive step in which the six powers tried to "get closer to our viewpoint".

Western officials had made clear they did not expect major progress in Almaty, aware that the closeness of Iran's presidential election in June is raising political tensions in Tehran and makes significant concessions unlikely.

"I hope the Iranian side is looking positively on the proposal we put forward," said European Union foreign policy chief Catherine Ashton, who led the talks on behalf of the powers. "We have to see what happens next."

The United States did not expect a breakthrough and "the result was clearly in line with those expectations," a senior U.S. official said.

The meeting was "useful" as the two sides agreed dates and venues for follow-up talks but there was a need for progress on confidence building measures, the official added.

UNDERGROUND NUCLEAR SITE

The West's immediate priority is that Iran halts higher-grade uranium enrichment and closes an underground facility, Fordow, where this work is carried out. The material is a relatively short technical step from bomb-grade uranium.

"What we care about at the end is concrete results," the U.S. official said.

One diplomat in Almaty said the Iranians appeared to be suggesting at the negotiations that they were opening new avenues, but that it was not clear if this was really the case.

Both sides said experts would meet for talks in the Turkish city of Istanbul on March 18 and that political negotiators would return to Almaty on April 5-6.

Russian negotiator Sergei Ryabkov confirmed that the powers had offered to ease sanctions on Iran if it stops enriching uranium to 20 percent fissile purity - a short technical step from weapons grade - at the Fordow underground site where it carries out its most controversial uranium enrichment work.

Western officials said the offer of sanctions relief included a resumption of trade in gold and precious metals.

One diplomat said that lifting an embargo on imports of Iranian petrochemical products to Europe, if Iran responded, was also on the table. But a U.S. official said the world powers had not offered to suspend oil or financial sanctions.

The sanctions are hurting Iran's economy and its chief nuclear negotiator, Saeed Jalili, suggested Iran could discuss its production of higher-grade nuclear fuel, although he appeared to rule out shutting Fordow.

In comments in Persian translated into English, Jalili told a news conference Fordow was under the supervision of the U.N. nuclear watchdog and there was no justification for closing it.

MOOD "MORE OPTIMISTIC"

Asked about the production of 20-percent enriched fuel, he reiterated Iran's position that it needed this for a research reactor and had a right to produce it.

Iran says its enrichment program is aimed solely at fuelling nuclear power plants so that it can export more oil, and that Israel's assumed nuclear arsenal is the main threat to peace in the region.

But Jalili did indicate that Iran might be prepared to talk about the issue, saying: "This can be discussed in the negotiations ... in view of confidence building."

Iran has also previously suggested that 20-percent enrichment was up for negotiation if it received the fuel from abroad instead. It also wants sanctions lifted.

"While an agreement to meet again may not impress skeptics of diplomacy, an important development did occur," said Trita Parsi, an expert on Iran. "The parties began searching for a solution by offering positive measures in order to secure concessions from the other side.

Another expert, Dina Esfandiary of the International Institute for Strategic Studies, said: "I note that the mood is more optimistic and that's great, but a deal still hasn't been reached and in my view its unlikely to be reached before the Iranian elections have come and gone."

(Additional reporting Fredrik Dahl in Almaaty, Georgina Prodhan in Vienna, Zahra Hosseinian in Zurich, Gabriela Baczynska in Moscow, Dan Williams in Jerusalem and Marcus George in Dubai; Writing by Timothy Heritage and Fredrik Dahl; Editing by Jon Hemming)

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