Asian shares slip, Basel ruling supports banks

SINGAPORE (Reuters) - Asian stocks drifted down on Monday as investors booked profits from a New Year rally that had pushed markets to multi-month highs, although financial stocks gained after global regulators decided to relax draft plans for tough new bank liquidity rules.

Commodity prices mostly held steady, supported by data showing the U.S. economy continuing on a path of slow but steady recovery that propelled Wall Street stocks to a five-year high.

Financial bookmakers called Europe's main share indexes to open flat or slightly lower, while S&P 500 index futures traded in Asia eased 0.2 percent, pointing to a weaker start in New York.

"It just seems like markets are entering a consolidation phase after recent gains and with most markets trading at fresh 12-month highs," said Stan Shamu, market strategist at financial spreadbetting firm IG in Melbourne.

The dollar fell against the yen, coming off a two-and-a-half year peak it had logged against the Japanese currency as investors adjusted to the possibility of more monetary stimulus in 2013 from the Bank of Japan and less from the U.S. Federal Reserve.

MSCI's broadest index of Asia Pacific shares outside Japan <.miapj0000pus>, which had reached its highest level since August 2011 on Thursday, eased 0.1 percent, while Tokyo's Nikkei share average <.n225> retreated after touching a 23-month high in early trade to close down 0.8 percent. <.t/>

CASH BUFFERS

The MSCI benchmark's financial sector sub-index <.miapjfn00pus> firmed after the Basel Committee of banking supervisors agreed on Sunday to give banks four more years and greater flexibility to build up cash buffers so they can use some of their reserves to help struggling economies.

HSBC Holdings Hong Kong shares rose 1 percent, while Australia and New Zealand Banking Group Ltd gained 0.6 percent. <.hk><.ax/>

Shares in Japanese exporters were supported by the trend of a weakening yen, which traded around 87.85 to the dollar, up 0.3 percent on the day, after the U.S. currency rose as far as 88.40 yen, its highest in nearly two-and-a-half years, on Friday.

The dollar posted a gain of around 2.7 percent against the yen last week, its biggest weekly rise in more than a year. Its gains had accelerated after minutes from the Federal Reserve's December meeting showed some policymakers had considered ending the Fed's bond-buying program as early as this year.

By contrast, many investors are now betting that Japan's new government, led by Prime Minister Shinzo Abe, will push to weaken the yen and drive through aggressive fiscal stimulus, and pressure the Bank of Japan to do the same on the monetary side.

Although the dollar may pull back against the yen given the speed of its rise over the past month, its uptrend seems likely to remain intact, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

"My sense is that the market could still head much higher," Maeba said. "I think 90 yen might be reached pretty soon."

The dollar firmed against the euro, which traded around $1.3035.

The U.S. stock benchmark S&P 500 index <.spx> closed at its highest level since December 2007 on Friday after data showed a steady pace of jobs growth and brisk expansion of the services sector in the world's biggest economy.

That offered support to growth-sensitive commodities, with copper little changed just below $8,100 a tonne, while Brent crude oil eased a little to around $111.20.

Spot gold firmed 0.3 percent to around $1,660 an ounce.

(Additional reporting by Masayuki Kitano; Editing by Eric Meijer)

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As Putin’s Grip Gets Tighter, a Time of Protest Fades in Russia

MOSCOW — As the final days of 2012 slipped away, no one at Denis Terekhov’s company was talking about the next antigovernment protest.

Compared with the same time last year — when Mr. Terekhov delivered an impromptu lecture on avoiding police detention — Moscow feels like Moscow again. Profits at this marketing firm have tripled, the corporate holiday party featured cocktails in an unnatural shade of blue, and his “office plankton,” as the city’s legion of desk workers are sometimes known, scattered to vacations as far as Bali and Paris.

Mr. Terekhov, who watched his employees as last year’s protests surged and ebbed, says it is now clear that they took part because it was fashionable, nothing more. They felt strongly about the anti-Putin rallies, he said, but “they also feel strong emotions about their iPhones.”

Still, judging from this group, it would be wrong to say nothing changed in the year that Vladimir V. Putin returned to the presidency. The fizzy excitement around last year’s street activism is entirely gone. But in its place is a deepening sense of alienation that poses its own long-term risk to the system.

Discussion of political activism in this office, an Internet marketing and communications firm called Social Networks Agency, is now coated with a rime of disappointment, as if a rare opportunity had been allowed to slip away. During the trial of the punk rock band Pussy Riot this past summer, Mr. Terekhov set aside one office as a screening room, where employees could watch a live stream of testimony with, as he put it, “laughter through tears.”

A space has been left by Pasha Elizarov, a project manager and opposition activist, who resigned and left Russia after investigators summoned him in connection with an inquiry into inciting a riot. He sent in his holiday greetings from Tanzania.

Their story is the story of a political season. Mr. Putin reclaimed the presidency last year in the face of unprecedented public opposition from people like these, young urban trendsetters who stepped in from the sidelines of politics to tell him his return was not welcome. The Kremlin acted to stop the protests; new laws prescribe draconian punishments for acts of dissent, and the courts have imprisoned a small number of activists. Mr. Putin and those around him have embraced a new, sharply conservative rhetoric, dismissing the urban protesters as traitors and blasphemers, enemies of Russia.

Last year’s protesters, who held out hope that Dmitri A. Medvedev would advance their agenda, are acutely aware that they are seen as outsiders. Irina Lukyanovich, 24, a copy editor who recently left the firm, said her peers were watching Russia’s leaders more closely now, and judging them more severely.

“It’s as if they are people from another planet,” Ms. Lukyanovich said. “It seems to me that in a year, the distance between them and us has gotten much greater.”

Yulia Fotchenko, an account director, sighed heavily when reminded of the elation she felt a year ago, when she stepped into the first large rally and her “consciousness was turned upside down.”

How does she feel now? Insulted, disappointed. As if nothing in Russia will change. She blames the protest leaders, who she said proved so unable to capitalize on the moment that the crowds will never trust them again. As for the sudden sense of community she felt, it proved fleeting.

“Suddenly we — a huge number of Internet hamsters — we decided that we had had enough, we got together and we went out,” Ms. Fotchenko said, using a slang term for Moscow’s digitally connected youth. “And then, whoops! We turned back into Internet hamsters, the leaders and all the rest of us. Because nothing happened.

“And now I feel despair which is even stronger, deeper, worse than it was before we began these actions,” she said.

Mr. Terekhov, 33, had been skeptical of the protests from the beginning, in part because he was left discouraged by his own brief career in opposition politics. A year ago, he made a point of warning his employees that by protesting they were facing serious risks, like riot police officers with truncheons. They needed to realize, he said, that “revolution is not a game.”

The risks went beyond truncheons, it turned out. On a Sunday evening in September, Mr. Terekhov received an e-mail from Mr. Elizarov, 27, the single high-profile political activist among his employees. Mr. Elizarov said he was resigning from his position as a project manager and was leaving Russia.

He had been summoned in a political prosecution, one that has been used to cast the protesters as dangerous radicals. So far, 19 people have been charged in the case dating to May 6, when a large anti-Putin march ended in a melee between the police and protesters. The only one to be sentenced, a man who inflicted no serious injury and cooperated with prosecutors, received four and a half years.

Investigators looked for Mr. Elizarov at home, and they then began to visit his relatives, one by one.

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Cricket-Herath alive and bowling despite death rumours

SYDNEY, Jan 5 (Reuters) – As Mark Twain might have said, rumours of the death of Sri Lankan spinner Rangana Herath which spread like wildfire across social media late on Friday proved to be greatly exaggerated.

Far from lying in a Sydney morgue alongside former test bowler Chaminda Vaas after perishing in a car crash as the reports had suggested, Herath was very much alive when he pitched up for work at the Sydney Cricket Ground on Saturday.

The most prolific wicket-taker in test cricket last year, the 34-year-old leg spinner claimed two Australian wickets to seal a haul of four for 95 and then contributed nine runs with the bat.

Team mate Dimuth Karunaratne told reporters at the conclusion of the day’s play that the team had been dumbfounded by the rumours.

“I heard about it when we having breakfast but I had no idea where that came from,” he said with a laugh.

“Guys from Sri Lanka were calling us asking ‘when is the funeral?’ and stuff like that.

“Rangana is alive,” he added, somewhat unneccessarily.

Herath’s efforts were not enough to prevent Australia taking an iron grip on the third test match on Saturday and move to the brink of a 3-0 series sweep.

That could all change, however, if he and Dinesh Chandimal, who finished the third day unbeaten on 22, are able to dig in on Sunday, inflate their lead beyond the current 87 and give Sri Lanka a decent target to bowl at.

The Sydney track has traditionally offered a lot of turn for spinners in the last couple of days of a test and, as Herath’s 60 wickets last year showed, there are few better spinners operating in test cricket at the moment.

“The wicket is turning a lot now and the Aussie guys are playing the fourth innings, so I think Rangana… can do something,” said Karunaratne.

Vaas has no position with the test team and remains, also unharmed, in Sri Lanka, Sri Lankan reporters said. (Editing by John O’Brien)

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Bethenny Frankel Divorcing Jason Hoppy

By Sarah Michaud

01/05/2013 at 05:00 PM EST

Bethenny Frankel and Jason Hoppy

Albert Michael/Startraks

It's official – Bethenny Frankel and Jason Hoppy's marriage is over.

Having announced a separation over the holidays, the reality star began the divorce process by filing earlier this week in New York, TMZ reports.

"It brings me great sadness to say that Jason and I are separating," Frankel, 42, had said in a statement Dec. 23. "This was an extremely difficult decision that as a woman and a mother, I have to accept as the best choice for our family."

The split comes after months of rumors that the pair – who married in 2010 and are parents to daughter Bryn, 2½ – were on the rocks.

"Bethenny is devastated," a friend tells PEOPLE.

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FDA: New rules will make food safer

WASHINGTON (AP) — The Food and Drug Administration says its new guidelines would make the food Americans eat safer and help prevent the kinds of foodborne disease outbreaks that sicken or kill thousands of consumers each year.

The rules, the most sweeping food safety guidelines in decades, would require farmers to take new precautions against contamination, to include making sure workers' hands are washed, irrigation water is clean, and that animals stay out of fields. Food manufacturers will have to submit food safety plans to the government to show they are keeping their operations clean.

The long-overdue regulations could cost businesses close to half a billion dollars a year to implement, but are expected to reduce the estimated 3,000 deaths a year from foodborne illness. The new guidelines were announced Friday.

Just since last summer, outbreaks of listeria in cheese and salmonella in peanut butter, mangoes and cantaloupe have been linked to more than 400 illnesses and as many as seven deaths, according to the federal Centers for Disease Control and Prevention. The actual number of those sickened is likely much higher.

Many responsible food companies and farmers are already following the steps that the FDA would now require them to take. But officials say the requirements could have saved lives and prevented illnesses in several of the large-scale outbreaks that have hit the country in recent years.

In a 2011 outbreak of listeria in cantaloupe that claimed 33 lives, for example, FDA inspectors found pools of dirty water on the floor and old, dirty processing equipment at Jensen Farms in Colorado where the cantaloupes were grown. In a peanut butter outbreak this year linked to 42 salmonella illnesses, inspectors found samples of salmonella throughout Sunland Inc.'s peanut processing plant in New Mexico and multiple obvious safety problems, such as birds flying over uncovered trailers of peanuts and employees not washing their hands.

Under the new rules, companies would have to lay out plans for preventing those sorts of problems, monitor their own progress and explain to the FDA how they would correct them.

"The rules go very directly to preventing the types of outbreaks we have seen," said Michael Taylor, FDA's deputy commissioner for foods.

The FDA estimates the new rules could prevent almost 2 million illnesses annually, but it could be several years before the rules are actually preventing outbreaks. Taylor said it could take the agency another year to craft the rules after a four-month comment period, and farms would have at least two years to comply — meaning the farm rules are at least three years away from taking effect. Smaller farms would have even longer to comply.

The new rules, which come exactly two years to the day President Barack Obama's signed food safety legislation passed by Congress, were already delayed. The 2011 law required the agency to propose a first installment of the rules a year ago, but the Obama administration held them until after the election. Food safety advocates sued the administration to win their release.

The produce rule would mark the first time the FDA has had real authority to regulate food on farms. In an effort to stave off protests from farmers, the farm rules are tailored to apply only to certain fruits and vegetables that pose the greatest risk, like berries, melons, leafy greens and other foods that are usually eaten raw. A farm that produces green beans that will be canned and cooked, for example, would not be regulated.

Such flexibility, along with the growing realization that outbreaks are bad for business, has brought the produce industry and much of the rest of the food industry on board as Congress and FDA has worked to make food safer.

In a statement Friday, Pamela Bailey, president of the Grocery Manufacturers Association, which represents the country's biggest food companies, said the food safety law "can serve as a role model for what can be achieved when the private and public sectors work together to achieve a common goal."

The new rules could cost large farms $30,000 a year, according to the FDA. The agency did not break down the costs for individual processing plants, but said the rules could cost manufacturers up to $475 million annually.

FDA Commissioner Margaret Hamburg said the success of the rules will also depend on how much money Congress gives the chronically underfunded agency to put them in place. "Resources remain an ongoing concern," she said.

The farm and manufacturing rules are only one part of the food safety law. The bill also authorized more surprise inspections by the FDA and gave the agency additional powers to shut down food facilities. In addition, the law required stricter standards on imported foods. The agency said it will soon propose other overdue rules to ensure that importers verify overseas food is safe and to improve food safety audits overseas.

Food safety advocates frustrated over the last year as the rules stalled praised the proposed action.

"The new law should transform the FDA from an agency that tracks down outbreaks after the fact, to an agency focused on preventing food contamination in the first place," said Caroline Smith DeWaal of the Center for Science in the Public Interest.

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Crackdowns Make Fleeing North Korea Harder

Woohae Cho for the International Herald Tribune

The Rev. Kim Seung-eun at his church in Cheonan, a center for activists who help smuggle refugees from North Korea.

CHEONAN, South Korea — The Rev. Kim Seung-eun said he could measure the increasing difficulty of smuggling people out of North Korea by the higher cost of bribing North Korean soldiers on the Chinese border to look the other way.

“They demand not only more cash, but also all kinds of things for themselves and their superiors,” said Mr. Kim, a South Korean human rights activist who helps North Koreans flee their totalitarian homeland and resettle in the South. “They’ve developed a taste for South Korean goods, too.”

Under North Korea’s new leader, Kim Jong-un, human rights activists and South Korean officials say, it has become increasingly difficult to smuggle refugees out of the country, contributing to a sharp drop in the number of North Koreans reaching South Korea in the past year.

The number of refugees has never been particularly large, since most North Koreans are so impoverished they find it all but impossible to raise the money to attempt an escape. But the tightening of controls at the Chinese border led to a fall of about 44 percent from the previous year in the number of refugees reaching South Korea in 2012. The total was 1,509, according to South Korean government data.

Despite the relatively small number, the flow of North Koreans defecting to South Korea to escape poverty and oppression has long been a major embarrassment for the North. Lately, the Chinese also appear to have tightened their control at the river border to help protect their client government. “The crackdowns in China and North Korea came in tandem,” said Mr. Kim, who manages a network of activists and smugglers from his Caleb Mission church in Cheonan, a city about 60 miles south of Seoul. “It’s become more difficult for my people to operate in North Korea and China.”

A devastating famine in the 1990s caused many North Koreans to flee, and the number of refugees peaked at 2,917 in 2009. Today, about 24,000 people who escaped from North Korea live in South Korea.

In the last years of his rule, Kim Jong-il, the previous dictator and the current ruler’s father, added more checkpoints on the roads to the Chinese border, according to South Korean activists and researchers. North Korea built more barriers along the border and rotated patrols more frequently to discourage corruption.

Under Kim Jong-un, who took over a year ago after his father’s death, border controls have tightened further, officials and activists say. The government began to jam the Chinese cellphone signals that activists relied on to coordinate their smuggling operations with collaborators in the North. North Korea also deployed equipment to trace cellphone signals.

“That significantly narrowed the window for cross-border cellphone conversations,” said Kim Hee-tae, a leader of the International Network of North Korea Human Rights Activists. His group raises money from churches; until last year it typically arranged for 180 to 190 North Korean refugees annually to escape to the South. But this past year, he said, his organization managed to bring in only about 100 people.

“Even after the bribes are paid, there is no guarantee of success,” said Do Hee-youn, head of the Citizens’ Coalition for the Human Rights of North Korean Refugees, based in Seoul. “We have recently seen cases where border guards were not punished for having taken bribes when they turned over the refugees.” Adding to the difficulty, some of the missionaries and brokers involved in the smuggling were rounded up by the Chinese police.

“It just became impossible to use public transportation in China because these days you cannot buy a train or bus ticket without a proper ID, which the North Koreans don’t have,” said the Rev. Chun Ki-won, another veteran human rights activist, who runs the Durihana Mission, a Christian group based in Seoul.

But for all the tighter controls imposed by the North Koreans and Chinese, there are still ways of slipping through the cracks.

Landing a border assignment is seen by many North Korean soldiers as a chance to make a fortune by collecting bribes from smugglers. The police in North Korea sometimes protect families with relatives in the South so they can take a cut from cash remittances from the South.

North Koreans have also developed an appetite for outside news and entertainment. “If early defectors fled North Korea for sheer ‘survival,’ an increasing number of North Koreans reaching South Korea flee for ‘a better life’ than they had in the North,” Kim Soo-am, an expert on North Korean refugees at the Korea Institute for National Unification in Seoul, recently wrote.

A group of 15 North Koreans that the Caleb Mission team in Cheonan had smuggled out in early December included a striking example of one such defector: a 29-year-old woman who yearned to become a television celebrity. “She had watched so many South Korean soap operas that she developed an illusion about life in South Korea,” Mr. Kim said, pointing out a particularly well-dressed woman in a photograph of the 15 North Koreans. “When we smuggled her out of North Korea, she was already wearing nothing but South Korean-made clothes.”

This article has been revised to reflect the following correction:

Correction: January 5, 2013

Because of an editing error, an earlier version of this article gave the incorrect time period for a devastating famine in North Korea. The famine happened in the 1990s, not in 2009.

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Kobe Bryant: I’m on Twitter now

LOS ANGELES (AP) — Kobe Bryant is no longer a holdout. He’s on Twitter.

With five words — “The antisocial has become social” — the Los Angeles Lakers guard sent the first tweet from his account Friday. About 270,000 people followed his verified account, (at)kobebryant, within a few hours and he was up to 365,000 late Friday night as the Lakers played the Clippers.

Bryant tiptoed into the Twitterverse last week when he briefly took over Nike basketball’s account, when he sent out things like a photo of him hanging out with his daughter, an ice bath that he was dreading and even a suit he was wearing to a particular game.

Bryant says those few days made him consider starting his own account, saying he enjoyed connecting with fans “with no filters.”

Heat star LeBron James has 6.8 million followers, the most of any NBA player.

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Courteney Cox: I'll 'Show My Boobs' on the New Season of Cougar Town

TV Watch

01/04/2013 at 08:00 PM EST

Courteney Cox is taking the term "boob tube" literally.

The Cougar Town star, 48, whose show moves from ABC to TBS on Jan. 8, eagerly anticipates more um, revealing scenes once the program makes its way to the cable network.

"You will not see one scene that I don't show my boobs," Cox joked to reporters Friday at the Television Critics Association winter tour, according to Access Hollywood.

"You know what? I'm getting older, so I've decided at this point I'm taking less focus [on] the face, and focusing here," she added, pointing to her chest. "By the time I'm much older, I will just be absolutely nude. I think it's [going to] work for me, I hope."

The show's executive producer, Bill Lawrence, backed up Cox's comments. "There is one difference [with the show going to cable]," he said Friday. "I think I'm allowed to say … Courteney did declare this the year of her cleavage."

Still, the star isn't exactly baring it all. Although there is an episode themed "naked day" for Cox's character Jules and her on-camera hubby Grayson (Josh Hopkins), there will be no actual nudity on the show.

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FDA proposes sweeping new food safety rules

WASHINGTON (AP) — The Food and Drug Administration on Friday proposed the most sweeping food safety rules in decades, requiring farmers and food companies to be more vigilant in the wake of deadly outbreaks in peanuts, cantaloupe and leafy greens.

The long-overdue regulations could cost businesses close to half a billion dollars a year to implement, but are expected to reduce the estimated 3,000 deaths a year from foodborne illness. Just since last summer, outbreaks of listeria in cheese and salmonella in peanut butter, mangoes and cantaloupe have been linked to more than 400 illnesses and as many as seven deaths, according to the federal Centers for Disease Control and Prevention. The actual number of those sickened is likely much higher.

The FDA's proposed rules would require farmers to take new precautions against contamination, to include making sure workers' hands are washed, irrigation water is clean, and that animals stay out of fields. Food manufacturers will have to submit food safety plans to the government to show they are keeping their operations clean.

Many responsible food companies and farmers are already following the steps that the FDA would now require them to take. But officials say the requirements could have saved lives and prevented illnesses in several of the large-scale outbreaks that have hit the country in recent years.

In a 2011 outbreak of listeria in cantaloupe that claimed 33 lives, for example, FDA inspectors found pools of dirty water on the floor and old, dirty processing equipment at Jensen Farms in Colorado where the cantaloupes were grown. In a peanut butter outbreak this year linked to 42 salmonella illnesses, inspectors found samples of salmonella throughout Sunland Inc.'s peanut processing plant in New Mexico and multiple obvious safety problems, such as birds flying over uncovered trailers of peanuts and employees not washing their hands.

Under the new rules, companies would have to lay out plans for preventing those sorts of problems, monitor their own progress and explain to the FDA how they would correct them.

"The rules go very directly to preventing the types of outbreaks we have seen," said Michael Taylor, FDA's deputy commissioner for foods.

The FDA estimates the new rules could prevent almost 2 million illnesses annually, but it could be several years before the rules are actually preventing outbreaks. Taylor said it could take the agency another year to craft the rules after a four-month comment period, and farms would have at least two years to comply — meaning the farm rules are at least three years away from taking effect. Smaller farms would have even longer to comply.

The new rules, which come exactly two years to the day President Barack Obama's signed food safety legislation passed by Congress, were already delayed. The 2011 law required the agency to propose a first installment of the rules a year ago, but the Obama administration held them until after the election. Food safety advocates sued the administration to win their release.

The produce rule would mark the first time the FDA has had real authority to regulate food on farms. In an effort to stave off protests from farmers, the farm rules are tailored to apply only to certain fruits and vegetables that pose the greatest risk, like berries, melons, leafy greens and other foods that are usually eaten raw. A farm that produces green beans that will be canned and cooked, for example, would not be regulated.

Such flexibility, along with the growing realization that outbreaks are bad for business, has brought the produce industry and much of the rest of the food industry on board as Congress and FDA has worked to make food safer.

In a statement Friday, Pamela Bailey, president of the Grocery Manufacturers Association, which represents the country's biggest food companies, said the food safety law "can serve as a role model for what can be achieved when the private and public sectors work together to achieve a common goal."

The new rules could cost large farms $30,000 a year, according to the FDA. The agency did not break down the costs for individual processing plants, but said the rules could cost manufacturers up to $475 million annually.

FDA Commissioner Margaret Hamburg said the success of the rules will also depend on how much money Congress gives the chronically underfunded agency to put them in place. "Resources remain an ongoing concern," she said.

The farm and manufacturing rules are only one part of the food safety law. The bill also authorized more surprise inspections by the FDA and gave the agency additional powers to shut down food facilities. In addition, the law required stricter standards on imported foods. The agency said it will soon propose other overdue rules to ensure that importers verify overseas food is safe and to improve food safety audits overseas.

Food safety advocates frustrated over the last year as the rules stalled praised the proposed action.

"The new law should transform the FDA from an agency that tracks down outbreaks after the fact, to an agency focused on preventing food contamination in the first place," said Caroline Smith DeWaal of the Center for Science in the Public Interest.

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S&P 500 finishes at 5-year high on economic data

NEW YORK (Reuters) - The benchmark Standard & Poor's 500 index ended at a five-year high on Friday, lifted by reports showing employers kept up a steady pace of hiring workers and the vast services sector expanded at a brisk rate.

The gains on the S&P 500 pushed the index to its highest close since December 2007 and its biggest weekly gain since December 2011.

Most of the gains came early in the holiday-shortened week, including the largest one-day rise for the index in more than a year on Wednesday after politicians struck a deal to avert the "fiscal cliff."

The Dow Jones industrial average <.dji> gained 43.85 points, or 0.33 percent, to 13,435.21. The Standard & Poor's 500 Index <.spx> rose 7.10 points, or 0.49 percent, to 1,466.47. The Nasdaq Composite Index <.ixic> edged up 1.09 points, or 0.04 percent, to 3,101.66.

For the week, the S&P gained 4.6 percent, the Dow rose 3.8 percent and the Nasdaq jumped 4.8 percent to post their largest weekly percentage gains in more than a year.

The CBOE Volatility index <.vix>, a measure of investor anxiety, dropped for a fourth straight session, giving the index a weekly decline of nearly 40 percent, its biggest weekly fall ever. The close of 13.83 on the VIX marks its lowest level since August.

In Friday's economic reports, the Labor Department said non-farm payrolls grew by 155,000 jobs last month, slightly below November's level. Gains were distributed broadly throughout the economy, from manufacturing and construction to healthcare.

Also serving to boost equities was data from the Institute for Supply Management showing U.S. service sector activity expanding the most in 10 months.

With the S&P 500 index at a five-year closing high, analysts said any gains above the index's intraday high near 1,475 in September may be harder to come by.

"We are getting to a point where we need a strong catalyst, which could be earnings, it could be three months of good economic data, it could be a variety of things," said Adam Thurgood, managing director at HighTower Advisors in Las Vegas, Nevada.

"What is going on right now is this conflicting view of fundamentals look pretty good and improving, and then you've got these negative tail risks that could blow everything up," Thurgood said.

He referred to "a fiscal superstorm brewing" of issues still left unresolved in Washington, including tough federal budget cuts and the need to raise the government's debt ceiling all within a couple of months.

The rise in payrolls shown by the jobs data did not make a dent in the U.S. unemployment rate still at 7.8 percent.

A Reuters poll on Friday of economists at Wall Street's top financial institutions showed that most expect the Fed in 2013 to end the program with which it bought Treasury debt in an effort to stimulate the economy.

A drop in Apple Inc shares of 2.6 percent to $528.36 kept pressure on the Nasdaq.

Adding to concerns about Apple's ability to produce more innovative products, rival Samsung Electronics Co Ltd is expected to widen its lead over Apple in global smartphone sales this year with growth of 35 percent. Market researcher Strategy Analytics said Samsung had a broad product lineup.

Eli Lilly and Co was among the biggest boost's to the S&P, up 3.7 percent to $51.56 after the pharmaceuticals maker said it expects its 2013 earnings to increase to $3.75 to $3.90 per share, excluding items, from $3.30 to $3.40 per share in 2012.

Fellow drugmaker Johnson & Johnson rose 1.2 percent to $71.55 after Deutsche Bank upgraded the Dow component to a "Buy" from a "Hold" rating. The NYSEArca pharmaceutical index <.drg> climbed 0.6 percent.

Shares of Mosaic Co gained 3.3 percent to $58.62. Excluding items, the fertilizer producer's quarterly earnings beat analysts' expectations, according to Thomson Reuters I/B/E/S.

Volume was modest with about 6.07 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly below the 2012 daily average of 6.42 billion.

Advancing stocks outnumbered declining ones on the NYSE by 2,287 to 701, while on the Nasdaq, advancers beat decliners 1,599 to 866.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Kenneth Barry)

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