News responsorial

Wall Street ends flat after late fade; S&P up for fourth month

NEW YORK (Reuters) - Stocks ended flat on Thursday, giving up modest gains late in the session, denying the Dow a chance to inch closer to all-time highs.

The S&P 500 still managed to close out February with a fourth straight month of gains. JC Penney Co Inc was the day's biggest loser, falling 17 percent to $17.57 after the department store operator reported a steep drop in sales.

The U.S. economy grew slightly in the fourth quarter, a turnaround from an earlier estimate showing contraction, and a drop in new claims for unemployment benefits last week added to a batch of data suggesting the economy continues its sluggish improvement.

The Dow was within striking distance of its record high after a year-to-date advance of more than 7 percent. The Dow's record closing high, set on October 9, 2007, stands at 14,164.53, while the Dow's intraday record high, set on October 11, 2007, stands at 14,198.10.

The Dow Jones Transportation Average <.djt>, seen as a bet on future growth, is up 12.9 percent this year, and the 20-stock index hit a record intraday high earlier on Thursday.

"To push through to new highs, you would have to see consistent positive economic data in the U.S. and have Europe stabilize - those are two pretty big requirements," said Jeff Morris, head of U.S. equities at Standard Life Investments in Boston.

"It wouldn't surprise me to see us bounce around as we have the past couple of weeks," Morris added.

Volume was low for most of the session until quarterly index-rebalancing activity hit the tape at the very close of trading.

After a strong January with gains of more than 5 percent, both the Dow and the S&P 500 found gains tougher to come by in February. Minutes from the Federal Reserve's January meeting sparked concerns that the central bank may pull back on its stimulus measures sooner than expected, while looming U.S. budget cuts and turbulent Italian elections tempered investors' aggressiveness.

But concerns about Fed policy were eased by testimony from Fed Chairman Ben Bernanke before a congressional committee earlier this week, as he defended the policy of buying bonds to keep interest rates low to boost growth, despite worries some have about possible inflation.

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

For the month, the Dow rose 1.4 percent, the S&P 500 gained 1.1 percent and the Nasdaq advanced 0.6 percent.

Limited Brands and Netflix ranked among the best-performing consumer stocks. Shares of Limited Brands, the parent of retailers Victoria's Secret and Bath & Body Works, gained 2.3 percent to $45.52. The stock of video streaming service Netflix climbed 2 percent to $$188.08.

In contrast, shares of Groupon Inc fell on weak revenue, with the daily deals company's tumbling 24.3 percent to $4.53.

Cablevision slumped 9.6 percent to $13.99 after the cable provider took a $100 million hit on costs related to Superstorm Sandy and posted deeper video customer losses than expected.

On a positive note, Mylan Inc gained 3.6 percent to $29.61 after the generic drugmaker posted a 25 percent rise in fourth-quarter profit and said it will buy a unit of India's Strides Arcolab Ltd.

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

Volume was modest with about 6.81 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the daily average of 6.46 billion.

Advancing stocks slightly outnumbered declining ones on the NYSE by 1,518 to 1,446. On the Nasdaq, the decliners had a slight edge, with 1,247 shares falling and 1,201 stocks rising.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

New pope must rebrand church

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Pope Benedict XVI

STORY HIGHLIGHTS

Timothy Stanley: The church that Benedict XVI leaves is beset by problems new pope must face

New pope must "rebrand" church, move beyond travails, reinvigorate Catholicism, he says

Stanley says fundamentals can't change, but pope can reconsider celibacy rule

Church should deal openly with sex abuse scandal, maintain doctrinal authority, he says

Editor's note: Timothy Stanley is a historian at Oxford University and blogs for Britain's The Daily Telegraph. He is the author of "The Crusader: The Life and Times of Pat Buchanan."

(CNN) -- Pope Benedict XVI gave an emotional farewell in St. Peter's Square on Wednesday. The moment said a lot about his papacy. On the one hand, the square was packed with an estimated 150,000 enthusiastic Catholics eager to show him love and respect. On the other hand, the pope's remarks conceded that his papacy was often a troubled one: "There were moments," he said, "as there were throughout the history of the church, when the seas were rough and the wind blew against us and it seemed that the Lord was sleeping."

The church that Benedict will no longer lead is indeed beset with problems -- its legacy of child sexual abuse, declining presence in the West, reputation for anachronism and, most recently, embarrassing allegations of a gay sex scandal in the hierarchy. The next pope is going to have to move the church beyond these travails to reinvigorate Catholicism for the 21st century. To borrow a much abused marketing term, he is going to have to subject it to a rebranding.

Timothy Stanley

Benedict was right to qualify his remarks about the present troubles by noting that the church has had many such moments before. It has survived being split in two (the schism of 1054), having two competing popes (the Great Schism of 1378 to 1417) and outright heresy (the Reformation of the 16th century).

It has twice confronted and found compromise with the tide of modernity -- the First Vatican Council confronted liberalism in 1869-1870 and the Second Vatican Council accommodated socialism and secularism in 1962-1965. Despite the tiredness or unfashionability that can come with old age, the church has always managed to find enthusiastic converts. Contrary to popular perceptions, Catholicism continues to add followers and priests and is growing fastest in the developing world. Sixteen percent of the world's Catholics now live in Africa.

So the next pope will have no reason to panic. Neither will he have any reason to mess with church fundamentals. Indeed, he cannot do this -- Catholic doctrine is a complex web and removing one strand of belief (by changing strictures against abortion, divorce, women priests, for example) would threaten the entire structure.

Opinion: Next pope must tackle child sex abuse

One belief justifies another (the church's attitude toward contraception flows from its understanding of what life is and God's role in it) and conceding that the church has been wrong on something in the past opens the door to reassessing its entire theology -- if the church was wrong about the gender of priests, is it wrong about the Immaculate Conception of the Virgin Mary or transubstantiation, the literal, not symbolic, transformation of bread and wine into the physical presence of Christ?

Interestingly, the one area where theology is governed by law rather than doctrine -- and so is theoretically open for debate -- is priestly celibacy. That's why some are floating it as a must-see reform for the next pope.

If the pope cannot get depressed and cannot rewrite the Catechism, he can at least rebrand -- in the purest sense of the word.

News: Was he the right man for the job?

When you rebrand a product, you don't change the content, just the packaging. The Catholic Church needs a pope who will communicate timeless messages in a new way. A good start would be reforming the machinery of the church, known as the Curia. The press office needs a total overhaul (incredibly, it still closes for a siesta at lunch), and the church needs to drop its heavy reliance upon the Italian language (when Benedict visited Poland, he spoke in Italian rather than the more widely used English or German).

Crucially, the personnel and outlook desperately need to be internationalized, to shift from a Eurocentric point of view to one that feels more embedded in the Americas, Africa and Asia. An obvious step toward that would be the appointment of a pope from somewhere other than Italy -- Ghanaian Peter Turkson and Nigerian Francis Arinze are two obvious contenders. The conservative theology of Turkson is a great example of how a rebrand wouldn't necessarily mean compromising the faith; liberals might cheer his ethnicity but despise his conservatism on matters sexual.

Opinion: Benedict a pope aware of his flaws

Whoever makes it to the Holy See, his priority must be to bring a sense of order to chaos and make it clear that the church is getting to grips with its problems. As Jeff Anderson writes, he must deal honestly and openly with the problem of child abuse -- naming names and welcoming independent investigators. He must travel and engage with different faiths. He must articulate truths in language that doesn't turn people off. He must make it clear that the church is open and welcoming to women. He must continue Benedict's good work in encouraging beauty and prayer in liturgy.

All of this can be done while renewing orthodoxy rather than rejecting it -- preserving the timeless authority of church doctrine. The experience of the early years of John Paul II's pontificate proves that energy and charisma can revitalize the church without surrendering entirely to modern thinking.

Finally, we must thank Benedict for making this rebranding possible. By stepping aside early, he has given Catholics a chance to prepare thoughtfully and carefully for the future. It was a humble act that might prove his greatest legacy to the church that he so dutifully served.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Timothy Stanley.

Tax on pack of cigarettes sold in Chicago up $1 to $6.67

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On the eve of a $1-per-pack Cook County cigarette tax increase, County Board President Toni Preckwinkle stood in the glow of X-rays showing damaged lungs, surrounded by some of Stroger Hospital's top pulmonary specialists as she discussed how smoking shortens people's lives.

The setting and talking points made clear the message Preckwinkle wanted to convey Thursday: This is a public health problem, one she plans to fight by giving smokers an incentive to quit and teens a reason not to start.

But the county's tax increase is more than just a campaign to protect people from emphysema and lung cancer. Preckwinkle is counting on $25.6 million this year from the move to help balance the budget. The history of cigarette tax increases suggests the county will be lucky to get that much in 2013 and should expect diminishing returns in the years ahead.

Smokes are a financial well that public officials have gone to repeatedly to shore up shaky finances at the local and state level. When the county tax increase takes effect Friday, a pack of cigarettes purchased in Chicago will come with $6.67 tacked on by the city, county and state. That's just behind New York City's nation-leading $6.86 in taxes per pack. It will also push the cost of a pack of cigarettes in Chicago to as much as $11.

Recent cigarette tax increases have had only a short-term benefit to the government bottom line. Some people quit, while others buy cigarettes online or outside the county or state.

When the county last raised the cigarette tax — by $1 per pack in 2006 — collections initially shot up by $46.5 million, hitting $203.7 million, county records show. But by 2009, the county collected $20.4 million less than it had in 2005.

Mayor Richard M. Daley bumped up the city of Chicago's share of the cigarette tax by 32 cents in 2005 and another 20 cents in 2006, to 68 cents per pack. He saw collections rise from $15.6 million in 2004 to $32.9 million in 2006, according to a city report. But city cigarette tax revenue fell to $28.4 million in 2007, and continued dropping to $18.7 million by 2011, records show.

At the state level, Quinn pushed through a $1-a-pack hike in June.

Before that, state lawmakers and Gov. George Ryan agreed on a 40-cent increase in 2002. Cigarette tax proceeds went up by more than $178 million in 2003, to $643.1 million, and rose to $729.2 million in 2004. The revenue then fell steadily to $549 million by 2010 before edging back up to $580 million last year, according to state records.

The county is preparing for the windfall from the $1 increase to be strong this year, then decline. County officials project that after bringing in $25.6 million for the remainder of this budget year, the increase will net about $29 million for 2014, $21 million in 2015, $15 million in 2016 and just $9 million in 2017.

Preckwinkle says that's OK with her.

"My hope would be that over the long run this is no longer a way in which governments look to raise money, because fewer and fewer people are smoking," she said. "So I would hope that we have the effect of reducing our revenue because more people quit."

The county could end up saving money as cigarette tax revenue falls because uninsured people with ailments related to smoking are such a heavy financial burden to the public hospital system, Preckwinkle said.

In the meantime, Preckwinkle pledged to hire more staff this year to crack down on stores selling untaxed packs and large-scale tobacco smuggling from surrounding states. "We anticipate that there may be some noncompliance, as there always is when you institute an increase like this," she said.

Preckwinkle also acknowledged that the higher tax rate will push some smokers into surrounding counties or Indiana to pick up their packs, but she predicted such cross-border runs will not last.

"While people may initially, when the prices rise, go to other states — Indiana, Wisconsin or wherever — over time that trek gets very tiresome and time-consuming, and they return to their former habits of buying their cigarettes nearby," Preckwinkle said.

But David Vite, president of the Illinois Retail Merchants Association, said he thinks the cigarette taxes in Cook County are now so high compared with surrounding areas that smokers will continue to make the longer drive, and Illinois stores near jurisdictions with lower taxes will struggle even more.

"You might see people return to their old patterns if we were talking about a slight disparity, say 25 cents a pack," Vite said. "But now we're talking about a difference of nearly $3 a pack compared to Indiana, almost $30 a carton. You're going to see guys working in factories saying, 'It's my week to make a run,' heading to Indiana and coming back with $1,500 worth of cigarettes for all their co-workers."

jebyrne@tribune.com

Twitter @_johnbyrne

Wall Street gains on Bernanke comments, S&P above 1,500

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NEW YORK (Reuters) - Stocks rose on Wednesday, with major indexes posting their best daily gains since early January, as Federal Reserve Chairman Ben Bernanke remained steadfast in supporting the Fed's stimulus policy and data pointed to economic improvement.

In a second day before a congressional committee, Bernanke defended the Fed's buying of bonds to keep interest rates low to boost growth. The market's jump of more than 1 percent also came on better-than-expected data on business spending plans and the housing market.

Bernanke's remarks helped the market rebound from its worst decline since November and put the S&P 500 index back above 1,500, a closely watched level that has been technical support until recently. The Dow Jones industrial average <.dji> closed at a level not seen since 2007 as it again pulled within striking distance of an all-time high.

Speaking before the House Financial Services Committee, Bernanke downplayed signs of internal divisions at the Fed, saying the policy of quantitative easing, or QE, has the support of a "significant majority" of top central bank officials.

Bernanke removed a headwind from markets arising from concerns the Fed's quantitative easing might end earlier than anticipated. Doubts about the Fed's intentions had broken a seven-week streak of gains by stocks.

"The Fed continues to encourage risk-taking in markets, which is a powerful tool that makes the danger not being long stocks, not in being too long," said Tom Mangan, a money manager at James Investment Research Inc in Xenia, Ohio.

The Dow Jones industrial average <.dji> was up 176.32 points, or 1.27 percent, at 14,076.45. The Standard & Poor's 500 Index <.spx> was up 19.07 points, or 1.27 percent, at 1,516.01. The Nasdaq Composite Index <.ixic> was up 32.61 points, or 1.04 percent, at 3,162.26.

Pending home sales jumped 4.5 percent in January, three times the rate of growth that had been expected. While orders for durable goods fell more than expected in January, non-defense capital goods orders excluding aircraft - a closely watched proxy for business spending plans - showed the biggest gain since December 2011.

About 74 percent of stocks traded on the New York Stock Exchange closed higher while 64 percent of Nasdaq-listed shares closed up.

The S&P turned very slightly higher on the week, recovering from the index's biggest daily drop since November on Monday. That drop came on concerns over Italy's election, as well as 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.

The index had climbed 6.3 percent for the year before pulling back on concerns about Fed policy and inconclusive elections in Italy, which rekindled fears of a new euro zone debt crisis.

"While the rally remains intact and there are reasons to be long-term bullish here, there are also reasons to not be surprised if we get a correction," said Mangan, who helps oversee $3.7 billion.

In earnings news, Priceline.com gained 2.6 percent to $695.91 after reporting adjusted earnings that beat expectations. TJX Cos Inc jumped 2.5 percent to $44.75 after the retail chain operator posted higher fourth-quarter results.

The S&P retail index <.spxrt> climbed 1.6 percent.

Target Corp offered a cautious outlook for consumer spending in 2013 following a weak holiday quarter. The stock dipped 1.1 percent to $63.32.

First Solar Inc plunged 14 percent to $27.04 after failing to give a full-year earnings and sales outlook, though it also swung to a quarterly profit.

Groupon Inc plunged 21 percent to $4.70 after the bell after reporting its fourth-quarter results.

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

About 6.23 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly below the daily average so far this year of about 6.48 billion shares.

(Editing by Nick Zieminski and Kenneth Barry)

Knicks overcome Curry's 54 to beat Warriors

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NEW YORK (AP) — Carmelo Anthony scored 35 points, J.R. Smith hit the tiebreaking shot with 1:10 left, and the New York Knicks overcame Stephen 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 a performance that had the crowd hanging on his every shot. But the Knicks finally stopped him with 1:28 to play when Raymond Felton blocked his shot with the score tied at 105.

That led to a jumper by Smith, who finished with 26 points. Anthony followed with another basket and the Knicks hung on to spoil former Knicks star and Warriors coach Mark Jackson's homecoming.

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.

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 about three minutes 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.

The Knicks, who hadn't played since Sunday, looked ready to blow the Warriors out early. An 11-2 run gave them a 25-11 lead late in the first quarter, which the Warriors trimmed to 27-18 at the end of the 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.

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. Coach Mike 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 limited first-half minutes.

Italy left on financial high-wire

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Prime Minister Silvio Berlusconi delivers a speech during a campaign rally in Rome on January 25, 2013.

STORY HIGHLIGHTS

Brilliant minds are still trying to figure out the financial impact of Italy's election

The lack of certainty is seen as a negative for Italy -- and the eurozone

Instability could reignite the eurozone crisis

But it depends on what deal will be done, and how the markets will respond

Editor's note: Louise Cooper is a financial blogger and commentator who regularly appears on television, radio and in print. She started her career at Goldman Sachs as a European equity institutional sales person and then become a financial and business journalist. She now writes CooperCity.

London (CNN) -- Brilliant minds across the financial world are still trying to work out the implications of the Italian election result.

For the time being, the best answer is that it is probably too soon to tell. After Tuesday's falls, a little stability has returned to markets, possibly because everyone is still trying to work out what to think.

Credit ratings agency Moody's has warned the election result is negative for Italy -- and also negative for other indebted eurozone states. It fears political uncertainty will continue and warns of a "deterioration in the country's economic prospects or difficulties in implementing reform," the agency said.

For the rest of the eurozone, the result risks "reigniting the euro debt crisis." Madrid must be looking to Italy with trepidation. If investors decide that Italy is looking risky again and back off from buying its debt, then Spain will be drawn into the firing line too.

Can the anti-Berlusconi save Italy?

Louise Cooper, of Cooper City

Standard & Poor's stated that Italy's rating was not immediately affected by the election but I think the key part of that sentence is "not immediately."

At the same time Herman Van Rompuy's tweets give an indication of the view from Brussels: "We must respect the outcome of democratic elections in Italy," his feed noted.

Really? That's a first. The democratically elected Silvio Berlusconi was forced out when he failed to follow through with austerity after the European Central Bank helped Italy by buying its debt in autumn 2011.

"It is now up to Italian political leaders to assume responsibility, compromise and form a stable government," Van Rompuy tweeted.

Did he see the results? The newcomer and anti-establishment comedian Beppe Grillo refuses to do a deal and yet he is the natural kingmaker, polling at 25%.

"Nor for Italy is there a real alternative to continuing fiscal consolidations and reforms," he continued.

Economically yes, but the Italian electorate disagree. And for the time being, Italy has a democracy (of sorts).

Finally: "I am confident that Italy will remain a stable member of the eurozone."

He hopes...

The key to whether the crisis reignites is whether investors begin to back away from lending to Italy. If so, this will be the big test of the ECB's resolve to save the euro.

Ex-convict looks to be winner in 2nd District GOP squeaker

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Republican voters are suggesting the 2nd Congressional District replace one felon with another after picking ex-convict Paul McKinley as the candidate to run for the seat recently ceded by former U.S. Rep. Jesse Jackson Jr.

While official results in the GOP special election will not be certified until next month, McKinley had a 23-vote lead over Eric Wallace, a multimedia company owner from Flossmoor, with all precincts reporting Wednesday.

McKinley, a convicted felon who served nearly 20 years in state prison for burglaries, armed robberies and aggravated battery, declared victory. Wallace, however, was not willing to concede, and he called the prospect of McKinley representing the GOP "an embarrassment."

McKinley is a frequent protester in Chicago with nearly a dozen arrests to prove it. His campaign mantra has been to rage against the machine. During candidate forums, McKinley has given passionate speeches blaming all of the district's woes on the long rule of the Democratic Party machine on the South Side and in the south suburbs.

"I was the only one in this party making the effort to rattle the saber against the machine," said McKinley, who would square off against Democrat Robin Kelly in the April 9 special election in a district that is overwhelmingly Democratic. "I think that's what resonated."

As McKinley celebrated his apparent victory, the state's Republican leadership was coming to grips with the fact that its party had just nominated someone with a long rap sheet to run in a district where the last three Democratic congressmen have left office amid scandal. That includes Jackson, who pleaded guilty last week to federal charges.

Pat Brady, the state's Republican chairman, had no comment Wednesday about McKinley's prospects. Privately, Republican leaders expressed dismay and concern. Given the historic Democratic leanings of the district, no national or state financial help from Republicans is likely, they said.

Wallace, who appears to have fallen just short for the GOP nomination, still holds out hope.

"We're waiting for all of the outstanding ballots to be tallied, including provisional as well as absentee," said Wallace, who lists a doctorate in biblical studies. "With it being this close, it wouldn't make a lot of sense not to wait for those to be counted. There could be 30, 40, 50 absentee ballots out there."

But in Cook County, there were just four such ballots. In Chicago there were three outstanding absentee or mail-in ballots and 67 provisional ballots. It's unclear how many of those provisional ballots were for the Republican primary, but very few GOP ballots were pulled in the city.

"He has that right, but he sounds a lot like Mitt Romney," McKinley said of Wallace's wait, alluding to Romney's delay in conceding victory in November to President Barack Obama.

Wallace expressed disappointment in the turnout, especially the low number of votes cast in Will and Kankakee counties, where he said many Republicans chose to cross over and vote in the Democratic primary to support Debbie Halvorson, who had opposed the president's proposed assault weapons ban.

"All they did was contribute to Robin Kelly winning, and now the Republican who is in the lead — and I've gotten to know Paul and like him — but Paul is a convicted felon," Wallace said. "If he ends up winning, it's just going to be an embarrassment for the Republican Party."

According to the Illinois Department of Corrections, McKinley was sentenced to concurrent three- and four-year sentences in 1978 for burglary and armed robbery in Cook County. In 1981 he was sentenced to four years for burglary, according to a prisons agency spokeswoman.

In 1985, McKinley was sentenced to five years for two counts of aggravated battery causing great bodily harm and 30 years for armed robbery. He was paroled in 1997, according to the state.

Two weeks ago, the Tribune asked the Cook County circuit court clerk's office to provide the old court records tied to those convictions. As of Wednesday, the records were not available. McKinley once again declined to discuss the convictions.

From 2003 through 2007, McKinley was arrested 11 times in the county for various offenses, most of them tied to protests. In many cases, the charges ultimately were dropped.

During a June 2005 bench trial, McKinley was found not guilty on two felony counts of threatening a public official. The case stemmed from a protest in which then-3rd Ward Ald. Dorothy Tillman accused McKinley of telling her to "take your country ass back to Mississippi. I'm going to get your country ass." McKinley insisted he was exercising his right to free speech and was acquitted, according to records.

In 2007, McKinley was sentenced to 20 hours of community service after being found guilty of disorderly conduct during a City Council meeting protest, records show. McKinley used a bullhorn to scream "profanity-laced statements" to aldermen as they were speaking, according a police report. Police arrested McKinley after he refused to stop banging on the glass window in the seating gallery overlooking the council chambers, records show.

McKinley also pleaded guilty to a June 2007 charge of criminal trespass to land. According to court records, he was asked to leave the Homan Square Foundation after his questions about the nonprofit's hiring procedures had been answered. The group advocates for the redevelopment of the West Side site that used to be Sears headquarters.

The candidate has not shied away from his arrest record during the campaign.

"I'm the ex-offender trying to save the next offender, and I believe Robin Kelly, she will become the next offender, too," McKinley said. "All of these next offenders in this district have been Democrats."

Kelly declined to be interviewed Wednesday.

bruthhart@tribune.com

rap30@aol.com

Wall Street rebounds on Bernanke comments, data

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NEW YORK (Reuters) - U.S. stocks rebounded from their worst decline since November on Tuesday after Federal Reserve Chairman Ben Bernanke defended the Fed's bond-buying stimulus and sales of new homes hit a 4 1/2-year high.

The S&P 500 had climbed 6 percent for the year and came within reach of all-time highs before the minutes from the Fed's January meeting were released last Wednesday. Since then, the benchmark S&P 500 has fallen 1 percent.

Bernanke, in testimony on Tuesday 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 comments helped ease investors' 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 November 7 in Monday's session.

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 5.7 percent jump in Home Depot to $67.56 boosted the Dow industrials. The PHLX housing sector index <.hgx> rose 3.2 percent.

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 in January.

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> gained 115.96 points, or 0.84 percent, to 13,900.13 at the close. The Standard & Poor's 500 Index <.spx> rose 9.09 points, or 0.61 percent, to 1,496.94. The Nasdaq Composite Index <.ixic> advanced 13.40 points, or 0.43 percent, to close at 3,129.65.

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 CBOE Volatility Index <.vix> or the VIX, a barometer of investor anxiety, dropped 11.2 percent, a day after surging 34 percent, its biggest percentage jump since August 18, 2011.

The uncertainty caused by the Italian elections continued 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.

Macy's shares gained 2.8 percent to $39.59 after the department-store chain stated it expects full-year earnings to be above analysts' forecasts because of strong holiday sales.

Volume was active with about 7.08 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, above the daily average of 6.48 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 2 to 1, while on the Nasdaq, three stocks rose for every two that fell.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal; Editing by Jan Paschal)

Mbakwe, Minnesota take down No. 1 Indiana 77-73

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MINNEAPOLIS (AP) — Indiana was starting to settle in again at No. 1 after weeks of shuffling at the top of the national rankings in this wildly unpredictable season of college basketball.

Trevor Mbakwe and Minnesota stepped forward, flexed their muscles and did their best to push the Hoosiers out.

Mbakwe had 21 points and 12 rebounds to help the Gophers take down top-ranked Indiana 77-73 on Tuesday night, the seventh time the No. 1 team in The Associated Press' poll has lost a game this season.

"We're trying to do big things so we have to learn from this mistake, but we have to dust it off real fast," Hoosiers star Victor Oladipo said.

Andre Hollins added 16 points for the Gophers (19-9, 7-8 Big Ten), who outrebounded Cody Zeller and the Hoosiers by a whopping 44-30 and solidified their slipping NCAA tournament bid with an emphatic performance against the Big Ten leader. The fans swarmed the court as the last second ticked off, the first time that's happened here in years.

"We weren't physical enough on the glass. That's the bottom line," Indiana coach Tom Crean said.

Zeller was held to nine points with four turnovers for the Hoosiers (24-4, 12-3), who have held the No. 1 ranking for 10 of 17 polls this season including the last four. Oladipo scored 16 points, but 14 of the 17 points by Jordan Hulls came before halftime.

"Cody's certainly capable of a lot," Crean said, "and I think he'll bounce back just fine."

Mbakwe, a sixth-year senior, posted his conference-leading seventh double-double. At 24 years old, he was a man among boys in many ways in this game, dominating both ends of the court when the Gophers needed him most. Minnesota had 23 offensive rebounds.

"We did need to play with a sense of urgency, play with a little edge," Gophers coach Tubby Smith said. "I think Trevor set that tone for us."

Elliott Eliason, who played every bit as well as Zeller, the slender sophomore in the post on the other side, scored seven straight points for Minnesota to tie the game at 46 shortly after Oladipo's reverse layup had given the Hoosiers a 44-36 edge, their biggest of the game.

Hollins, who missed eight of his first nine shots, scraped off a high screen by Eliason to pull up for a 3-pointer and give the Gophers a 51-48 lead. Mbakwe got a rebound to keep a key possession alive then grabbed another board to set up his off-balance bank shot to make it 56-53 in favor of Minnesota.

"I didn't feel I was playing up to my potential lately. I just wanted to come out and be aggressive," Mbakwe said.

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, enough of one to withstand a couple of 3-pointers by Christian Watford and one by Hulls in the closing minutes.

Mbakwe, who played for Crean when they were at Marquette in 2007-08, has had some of his better games against the Hoosiers.

This was his best.

He gave the Gophers and their home crowd a double-shot of energy early with 10 points in the first 6½ minutes, plus a jarring block of Zeller's inside shot that knocked the 7-footer to the court.

"He's a high-level, high-energy, tough guy who plays the game at a desperate level," Crean said. "Obviously I'm biased, but there's no shame in that."

Zeller, Indiana's leading scorer and the second-best shooter in the Big Ten behind Oladipo, was 0 for 4 from the field in the first half with two turnovers, two fouls and two points. The Gophers scored only three points in the last 7 minutes of the half, but they trailed only 34-30.

The Hoosiers are still in position for their first outright Big Ten regular season championship since 1993, with a one-game edge in the loss column over Michigan State, Michigan and Wisconsin. With home games against Iowa and Ohio State, 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 paint they endured here.

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

The Gophers were back on their uniquely raised home court, trying desperately to boost spirits that have sagged under the weight of eight losses in their previous 11 games. Smith even had the team meet with a sports psychologist. They hadn't topped 58 points in their previous five games. After being ranked in 11 straight polls, the Gophers didn't get one vote this week.

They'll get a few in the next one.

"We've had a lot of people supporting them, encouraging them. I think they knew how important the game was, but I sensed a very calm, matter-of-fact group of guys," Smith said, adding: "They're very confident about who they are."

___

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

Benedict: Pope aware of his flaws?

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Pope Benedict XVI delivers his last Angelus Blessing to thousands of pilgrims gathered in Saint Peter's Square on February 24.

STORY HIGHLIGHTS

Sister Mary Ann Walsh: Pope Benedict acknowledged that he made mistakes

Walsh: In firestorm over scholarly quotes about Islam, he went to great lengths to atone

Walsh: Similarly, he quickly reversed a decision that had angered Jews and repaired ties

Even his stepping down is a nod to his humanity and his love of the church, she says

Editor's note: Sister Mary Ann Walsh is director of media relations for the U.S. Conference of Catholic Bishops and a member of the Sisters of Mercy of the Americas Northeast Regional Community. She is a former foreign correspondent at Catholic News Service (CNS) in Rome and the editor of "John Paul II: A Light for the World," "Benedict XVI: Essays and Reflections on his Papacy," and "From Pope John Paul II to Benedict XVI."

(CNN) -- One of the Bible's paradoxical statements comes from St. Paul's Epistle to the Galatians: "Power is made perfect in infirmity."

The poetic statement proclaims that when we are weak, we are strong. Pope Benedict XVI's stepping down from what many consider one of the most powerful positions in the world proves it. In a position associated with infallibility -- though that refers to formal proclamations on faith and morals -- the pope declares his weakness.

Sister Mary Ann Walsh

His acceptance of frailty speaks realistically about humanity: We grow old, weaken, and eventually die. A job, even one guided by the Holy Spirit, as we Roman Catholics believe, can become too much for us.

Acceptance of human frailty has marked this papacy. We all make mistakes, but the pope makes them on a huge stage.

He was barely into his papacy, for example, when he visited Regensburg, Germany, where he once taught theology. Like many a professor, he offered a provocative statement to get the conversation going. To introduce the theme of his lecture, the pope quoted from an account of a dialogue between the Byzantine Emperor Manuel II Paleologus and an unnamed Muslim scholar, sometime near the end of the 14th century -- a quote that was misinterpreted by some as a condemnation of Mohammed and Islam.

Opinion: 'Gay lobby' behind pope's resignation? Not likely

Twice, the pope emphasized that he was quoting someone else's words. Unfortunately, the statement about Islam was taken as insult, not a discussion opener, and sparked rage throughout the Muslim world.

The startled pope had to explain himself. He apologized and traveled two months later to Istanbul's Blue Mosque, where he stood shoeless in prayer beside the Grand Mufti of Istanbul. Later he hosted Muslim leaders at the Vatican at the start of a Catholic-Muslim forum for dialogue. It was a human moment -- a mistake, an apology and atonement -- all round.

A similar controversy erupted when he tried to bring the schismatic Society of St. Pius X back into the Roman Catholic fold.

In a grand gesture toward reconciliation, he lifted the excommunication of four of its bishops, unaware that one, Richard Williamson, was a Holocaust denier. This outraged many Jews. Subsequently the Vatican said the bishop had not been vetted, and in a bow to modernity said officials at least should have looked him up on the Internet.

In humble response, Benedict reiterated his condemnation of anti-Semitism and told Williamson that he must recant his Holocaust views to be fully reinstated. Again, his admission of a mistake and an effort to mend fences.

News: Scandal threatens to overshadow pope's final days

Pope Benedict XVI came from a Catholic Bavarian town. Childhood family jaunts included trips to the shrine of the Black Madonna, Our Lady of Altotting. He entered the seminary at the age of 13. He became a priest, scholar and theologian. He lived his life in service to the church. Even in resigning from the papacy, he embraces the monastic life to pray for a church he has ever loved.

With hindsight, his visit to the tomb of 13th century Pope Celestine V, a Benedictine monk who resigned from the papacy eight centuries before, becomes poignant.

In 2009, on a visit to Aquila, Italy, Benedict left at Celestine's tomb the pallium, a stole-like vestment that signifies episcopal authority, that Benedict had worn for his installation as pope. The gesture takes on more meaning as the monkish Benedict steps down.

We expect the pope to be perfect. Catholics hold him to be the vicar of Christ on earth. He stands as a spiritual leader for much of the world. Statesmen visit him from around the globe. He lives among splendid architecture, in the shadow of the domed St. Peter's Basilica. All testify to an almost surreal omnipotence.

Complete coverage of the pope's resignation

In this world, however, walked a vulnerable, human person. And in a paradox of life, his most human moment -- giving up the power of office -- may prove to be his most potent, delivering a message that, as St. Paul noted many centuries ago, "Power is made perfect in infirmity."

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The opinions expressed in this commentary are solely those of Mary Ann Walsh.

Winter storm: Lingering snow could mean messy commute

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

The storm that struck in midmorning had socked the Chicago area with the season's biggest snowfall by Tuesday evening and was expected to drop another inch or two as it lingers through Wednesday, forecasters said.

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, with Gurnee in Lake County reporting 10 inches of accumulation and Beach Park, also in Lake County, reporting 9.5 inches.

By 10 p.m., 4.2 inches had fallen at O'Hare International Airport, according to the National Weather Service. That brought the official total for the season to 17.8 inches, and February's total to 14.3 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

Italy parties seek way out of election stalemate

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ROME (Reuters) - Italy's stunned political parties searched for a way forward on Tuesday after an inconclusive election gave none of them a parliamentary majority and threatened prolonged instability and a renewal of the European financial crisis.

The results, notably the dramatic surge of the anti-establishment 5-Star Movement of comic Beppe Grillo, left the center-left bloc with a majority in the lower house but without the numbers to control the upper chamber, the Senate.

Financial markets fell sharply at the prospect of a stalemate that reawakened memories of the crisis that pushed Italy's borrowing costs toward unsustainably high levels and brought the euro zone to the brink of collapse in 2011.

"The winner is: Ingovernability," ran the headline in Rome newspaper Il Messaggero, reflecting the deadlock the country will have to confront in the next few weeks as sworn enemies are forced to work together to form a government.

Ratings agency Standard & Poor's said on Tuesday that policy choices of the next Italian government would be crucial for the country's creditworthiness, underlining the need for a coalition that can agree on new reforms.

Pier Luigi Bersani, head of the center-left Democratic Party (PD), has the difficult task of trying to agree a "grand coalition" with former prime minister Silvio Berlusconi, the man he blames for ruining Italy, or striking a deal with Grillo, a completely unknown quantity in conventional politics.

The alternative is new elections either immediately or within a few months, although both Berlusconi and Bersani have indicated that they want to avoid a return to the polls if possible: "Italy cannot be ungoverned and we have to reflect," Berlusconi said in an interview on his own television station.

For his part, Grillo, whose movement won the most votes of any single party, has indicated that he believes the next government will last no more than six months.

"They won't be able to govern," he told reporters on Tuesday. "Whether I'm there or not, they won't be able govern."

He said he would work with anyone who supported his policy proposals, which range from anti-corruption measures to green-tinted energy measures but rejected suggestions of entering a formal coalition: "It's not time to talk of alliances... the system has already fallen," he said.

The election, a massive rejection of the austerity policies applied by Prime Minister Mario Monti with the backing of international leaders from U.S. President Barack Obama to German Chancellor Angela Merkel, caused consternation across Europe.

German Finance Minister Wolfgang Schaeuble put a brave face on it, saying "that's democracy".

Spanish Foreign Minister Jose Manuel Garcia-Margallo was more pessimistic.

"This is a jump to nowhere that does not bode well either for Italy or Europe," he said.

A long recession and growing disillusionment with mainstream parties and tax-raising austerity fed a bitter public mood and contributed to the massive rejection of Monti, whose centrist coalition was relegated to the sidelines.

Projections by the Italian center for Electoral Studies showed that the center-left will have 121 seats in the Senate, against 117 for the center-right alliance of Berlusconi's PDL and the regionalist Northern League. Grillo would take 54.

That leaves no party with the majority in a chamber which a government must control to pass legislation.

"THE BELL IS RINGING"

On a visit to Germany, President Giorgio Napolitano said he would not comment until the parties had consulted with each other and Bersani called on Berlusconi and Grillo to "assume their responsibilities" to ensure Italy could have a government.

He warned that the election showed austerity policies alone were no answer to the economic crisis and said the result carried implications beyond Italy.

"The bell is ringing for Europe as well," he said in his first public comments since the election.

He said he would present a limited number of reform proposals to parliament, focusing on jobs, institutional reform and European policy.

However forming an alliance may be long and difficult and could test the sometimes fragile internal unity of the mainstream parties.

"The idea of a majority without Grillo is unthinkable. I don't know if anyone in the PD is considering it but I'm against it," said Matteo Orfini, a member of Bersani's PD secretariat.

"The idea of a PD-PDL government, even if it's backed by Monti, doesn't make any sense," he said.

For his part, Berlusconi won a boost when his Northern League ally Roberto Maroni won the election to become regional president of Lombardy, Italy's economic heartland and one of the richest and most productive areas of Europe.

For Italian business, with an illustrious history of export success, the election result brought dismay that there would be no quick change to what they see as a regulatory sclerosis that has kept the economy virtually stagnant for a decade.

"This is probably the worst possible scenario," said Francesco Divella, whose family began selling pasta under its eponymous brand in 1890 in the southern region of Puglia.

Berlusconi's campaign, mixing sweeping tax cut pledges with relentless attacks on Monti and Merkel, echoed many of the themes pushed by Grillo and underlined the increasingly angry mood of the Italian electorate.

But even if the next government turns away from the tax hikes and spending cuts brought in by Monti, it will struggle to revive an economy that has scarcely grown in two decades.

Monti was widely credited with tightening Italy's public finances and restoring its international credibility after the scandal-plagued Berlusconi, who is currently on trial for having sex with an under-age prostitute.

However, Monti struggled to pass the kind of structural reforms needed to improve competitiveness and lay the foundations for a return to economic growth. A weak center-left government may not find it any easier.

The view from some voters, weary of the mainstream parties, was unrepentant: "It's good," said Roger Manica, 28, a security guard in Rome, who voted for the center-left PD.

"Next time I'll vote 5-Star. I like that they are changing things, even if it means uncertainty. Uncertainty doesn't matter to me, for me what's important is a good person who gets things done," he said. "Look how well they've done."

(Additional reporting by Barry Moody, Gavin Jones, Lisa Jucca, Steven Jewkes, Steve Scherer, Catherine Hornby and Massimiliano Di Giorgio, Annika Breidthardt in Berlin. Writing by Philip Pullella and James Mackenzie; Editing by Peter Graff)

Wall Street trips and falls on cloudy Italian election

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NEW YORK (Reuters) - Stocks on Monday suffered their biggest drop since November after a strong showing in Italian elections by groups opposed to the country's economic reforms triggered worry that Europe's debt problems could once again destabilize the global economy.

The decline marks the biggest percentage drop for the benchmark Standard & Poor's 500 Index since November7, and drove the S&P down to its lowest close since January 18. The CBOE Volatility Index <.vix> or VIX, Wall Street's favorite barometer of fear, surged 34 percent, its biggest jump since August 18, 2011.

Selling accelerated late in the trading session after the S&P 500 fell below the 1,500 level, which has acted as a significant support point. Monday marked the S&P's first close under 1,500 since February 4.

Italy's center-left coalition holds a slim lead over former Prime Minister Silvio Berlusconi's center-right bloc in the election for the lower house of parliament, three TV projections indicated. But any government must also command a majority in the Senate, a race that is decided by region.

The resulting gridlock in parliament could lead to new elections and cast into doubt Italy's ability to pay down its debt.

"Europe hasn't gone away as an issue, it is going to hang around, and it is rearing its ugly head today," said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.

"If someone gets elected who is simply not going to play by the rules, what are they going to do? It puts them in a real quandary here because their financial support, their monetary support is all stipulated by the fact that these austerity programs are going to be in place."

Earlier polls pointing to a center-left victory boosted stocks in Milan and other European markets, and also helped lift the S&P 500 to a session high of 1,525.84 on optimism that Italy would continue down its austerity path.

After a strong start to the year, equities have retreated more recently. The S&P 500's slight fall last week was its first weekly drop after a seven-week string of gains.

In Monday's volatile session, 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 2.7 percent.

The CBOE Volatility Index <.vix> ended at 18.99, up 34.02 percent.

The Dow Jones industrial average <.dji> dropped 216.40 points, or 1.55 percent, to 13,784.17 at the close. The Standard & Poor's 500 Index <.spx> lost 27.75 points, or 1.83 percent, to 1,487.85. The Nasdaq Composite Index <.ixic> fell 45.57 points, or 1.44 percent, to 3,116.25.

Although the overall market lost ground on Monday, there were a few bright spots.

Barnes & Noble Inc shares shot up 11.5 percent to $15.06 after the bookseller's chairman offered to buy its declining retail business.

Amgen Inc shares climbed 3.1 percent to $89.55, 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 lost 85.4 percent to $2.42.

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

Political uncertainty on the home front, though, is also on Wall Street's mind.

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," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Lowe's Companies Inc lost 4.8 percent to $35.86 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.

Volume was active with about 7.27 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, above the daily average of 6.46 billion.

Declining stocks outnumbered advancing ones on both the NYSE and the Nasdaq by a ratio of about 4 to 1.

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

Vatican 'Gay lobby'? Probably not

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STORY HIGHLIGHTS

Benedict XVI not stepping down under pressure from 'gay lobby,' Allen says

Allen: Benedict is a man who prefers the life of the mind to the nuts and bolts of government

However, he says, much of the pope's time has been spent putting out fires

Editor's note: John L. Allen Jr. is CNN's senior Vatican analyst and senior correspondent for the National Catholic Reporter.

(CNN) -- Suffice it to say that of all possible storylines to emerge, heading into the election of a new pope, sensational charges of a shadowy "gay lobby" (possibly linked to blackmail), whose occult influence may have been behind the resignation of Benedict XVI, would be right at the bottom of the Vatican's wish list.

Proof of the Vatican's irritation came with a blistering statement Saturday complaining of "unverified, unverifiable or completely false news stories," even suggesting the media is trying to influence the papal election.

Two basic questions have to be asked about all this. First, is there really a secret dossier about a network of people inside the Vatican who are linked by their sexual orientation, as Italian newspaper reports have alleged? Second, is this really why Benedict XVI quit?

John L. Allen Jr.

The best answers, respectively, are "maybe" and "probably not."

It's a matter of record that at the peak of last year's massive Vatican leaks crisis, Benedict XVI created a commission of three cardinals to investigate the leaks. They submitted an eyes-only report to the pope in mid-December, which has not been made public.

It's impossible to confirm whether that report looked into the possibility that people protecting secrets about their sex lives were involved with the leaks, but frankly, it would be surprising if it didn't.

There are certainly compelling reasons to consider the hypothesis. In 2007, a Vatican official was caught by an Italian TV network on hidden camera arranging a date through a gay-oriented chat room, and then taking the young man back to his Vatican apartment. In 2010, a papal ceremonial officer was caught on a wiretap arranging liaisons through a Nigerian member of a Vatican choir. Both episodes played out in full public view, and gave the Vatican a black eye.

Pope Benedict XVI

HIDE CAPTION

In that context, it would be a little odd if the cardinals didn't at least consider the possibility that insiders leading a double life might be vulnerable to pressure to betray the pope's confidence. That would apply not just to sex, but also potential conflicts of other sorts too, such as financial interests.

Vatican officials have said Benedict may authorize giving the report to the 116 cardinals who will elect his successor, so they can factor it into their deliberations. The most immediate fallout is that the affair is likely to strengthen the conviction among many cardinals that the next pope has to lead a serious house-cleaning inside the Vatican's bureaucracy.

It seems a stretch, however, to suggest this is the real reason Benedict is leaving. For the most part, one should probably take the pope at his word, that old age and fatigue are the motives for his decision.

That said, it's hard not to suspect that the meltdowns and controversies that have dogged Benedict XVI for the last eight years are in the background of why he's so tired. In 2009, at the height of another frenzy surrounding the lifting of the excommunication of a Holocaust-denying traditionalist bishop, Benedict dispatched a plaintive letter to the bishops of the world, voicing hurt for the way he'd been attacked and apologizing for the Vatican's mishandling of the situation.

Even if Benedict didn't resign because of any specific crisis, including this latest one, such anguish must have taken its toll. Benedict is a teaching pope, a man who prefers the life of the mind to the nuts and bolts of government, yet an enormous share of his time and energy has been consumed trying to put out internal fires.

It's hard to know why Benedict XVI is stepping off the stage, but I doubt it is because of a "gay lobby."

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The opinions expressed in this commentary are solely those of John L. Allen Jr.

Blackhawks win in overtime, extend streak to 19

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Nikolai Khabibulin stumbled coming out of the tunnel from the Oilers' dressing room to start the second period before steadying himself on the bench and taking the ice.

Then the Oilers goaltender was tripped up by the Blackhawks, and the longest streak in NHL history to start a season without a regulation loss lives on at 19.

Marian Hossa scored the winner in overtime to lift the Hawks to a 3-2 victory over the Oilers on Monday night at the United Center. Patrick Kane and Viktor Stalberg had goals in regulation and Ray Emery earned the win in goal as the Hawks improved to 16-0-3 this season. Dating to last season, they have gone 25 consecutive games with at least one point.

Jeff Petry and Nail Yakupov scored for the Oilers, who kicked off a 17-day, nine-game trip with the loss.

The Oilers came out with the speed and determination they displayed last season against the Hawks when they won three of four games with a 24-15 goal advantage. Emery was tested early but came up big when he dropped to his pads to smother an attempt from the slot by Ales Hemsky.

A delay-of-game penalty on Magnus Paajarvi for flipping the puck into the stands produced offense from both sides. Edmonton got on the board while short-handed as Lennart Petrell raced into the Hawks' zone on a breakaway after defenseman Duncan Keith fell down. Emery made a strong save on Petrell's attempt, but the rebound was ripe for the picking and Petry fired it into the open net.

With time running out in the penalty, the Hawks displayed the resiliency that has been a key to their points streak as Kane worked his way into the slot and slid a backhander past Khabibulin for his 10th goal of the season and a 1-1 tie.

Later in the first, Emery kept it even when he stoned Corey Potter from in close with the Oilers on the power play.

In the second, Daniel Carcillo, who was the most physical player on the ice for both sides with booming hits throughout the game, had a chance offensively from the slot but couldn't solve Khabibulin.

Brandon Saad's second penalty of the game for the Hawks led to the Oilers' second goal. Edmonton moved the puck nicely and Sam Gagner hit an open Yakupov with a pass and the rookie unloaded a one-timer past Emery.

Stalberg pulled the Hawks even early in the third when he stuffed a shot under the pad of Khabibulin from the crease. A video review confirmed the puck crossed the line and the score was 2-2.

The close game was nothing new to the Hawks, who entered the game with a 9-0-3 mark in one-goal games.

"The whole league is close," coach Joel Quenneville said. "When you aren't playing … you're watching and it's a one-goal night and you're hoping it's not a three-point game. Everybody keeps themselves in games."

ckuc@tribune.com

Twitter @ChrisKuc

Italy faces stalemate after election shock

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ROME (Reuters) - Italy faced political deadlock on Tuesday after a stunning election that saw the anti-establishment 5-Star Movement of comic Beppe Grillo become the strongest party in the country but left no group with a clear majority in parliament.

The center-left coalition led by Pier Luigi Bersani won the lower house by around 125,000 votes and claimed the most seats in the Senate but was short of the majority in the upper house that it would need to govern.

Bersani claimed victory but said it was obvious that Italy was in "a very delicate situation". Party officials said the center-left would try to form a government but it was unclear what its options would be.

Neither Grillo, a comedian-turned-politician who previously ruled out any alliance with another party, nor Silvio Berlusconi's center-right bloc, which threatened to challenge the close tally, showed any immediate willingness to negotiate.

World financial markets reacted nervously to the prospect of a government stalemate in the euro zone's third-largest economy with memories still fresh of the financial crisis that took the 17-member currency bloc to the brink of collapse in 2011.

Italy's borrowing costs have come down in recent months, helped by the promise of European Central Bank support but the election result confirmed fears that it would not produce a government strong enough to implement effective reforms.

Grillo's surge in the final weeks of the campaign threw the race open, with hundreds of thousands turning up at his rallies to hear him lay into targets ranging from corrupt politicians and bankers to German Chancellor Angela Merkel.

In just three years, his 5-Star Movement, heavily backed by a frustrated generation of young Italians increasingly shut out from permanent full-time jobs, has grown from a marginal group to one of the most talked about political forces in Europe.

Its score of 25.5 percent in the lower house was just ahead of the 25.4 percent for Bersani's Democratic Party, which ran in a coalition with the leftist SEL party and it won almost 8.7 million votes overall, more than any other single party.

"The 5-Star Movement is the real winner of the election," said SEL leader Nichi Vendola, who said that his coalition would have to deal with Grillo, who mixes fierce attacks on corruption with policies ranging from clean energy to free Internet.

RECESSION

"It's a classic result. Typically Italian," said Roberta Federica, a 36-year-old office worker in Rome. "It means the country is not united. It is an expression of a country that does not work. I knew this would happen."

A long recession and growing disillusion with mainstream parties fed a bitter public mood that saw more than half of Italian voters back parties that rejected the austerity policies pursued by Prime Minister Mario Monti with the backing of Italy's European partners.

Stefano Zamagni, an economic professor at Bologna University said the result showed that a significant share of Italians "are fed up with following the austerity line of Germany and its northern allies".

"These people voted to stick one up to Merkel and austerity," he said.

Election rules give the center-left a solid majority in the lower house, despite its slim advantage in terms of votes, but without the Senate it will not be able to pass legislation.

Calculations by the Italian Centre for Electoral Studies, part of LUISS university in Rome, gave 121 seats to Bersani's coalition, 117 to Berlusconi, 54 for Grillo and 22 to the centrist coalition led by Monti.

That leaves no party or likely alliance with the 158 seats needed to form a Senate majority.

Even if the next government turns away from the tax hikes and spending cuts brought in by Monti, it will struggle to revive an economy which has scarcely grown in two decades.

Monti was widely credited with tightening Italy's public finances and restoring its international credibility after the scandal-plagued Berlusconi, whom he replaced as the 2011 financial crisis threatened to spin out of control.

But he struggled to pass the kind of structural reforms needed to improve competitiveness and lay the foundations for a return to economic growth and a weak center-left government may not find it any easier.

(Additional reporting by Naomi O'Leary and Stephen Jewkes; Editing by Doina Chiacu)

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