News Update!

Moody's says more steps needed to save U.S. credit rating

By Daniel Bases

NEW YORK (Reuters) - The United States must do more than the recently passed " fiscal cliff" measures if the country is to rescue its Aaa debt rating from its current negative outlook, rating agency Moody's Investors Service said on Wednesday.

Standard & Poor's said the deal does not affect its negative view of the U.S. credit outlook, and said more work remains ahead for policymakers.

The last minute deal passed on Tuesday to avert potentially devastating tax hikes and spending cuts clarifies the medium-term deficit and debt trajectory of the federal government, Moody's said in a statement.

However, it does not provide a basis for meaningful improvement in the government's debt ratios over the medium-term, Moody's said.

" Our ratings stance is to wait and see what the outcome of all of this is in the next few months, before we make any decision on the rating outlook or the rating itself," Steven Hess, lead U.S. sovereign credit analyst at Moody's told Reuters.

" It is an important step, but it is the first step," he said.

Lowering the U.S. budget deficits and setting them on a long-term, downward trajectory is needed in order to return the U.S. sovereign credit outlook to stable from negative.

" On the other hand, lack of further deficit reduction measures could affect the rating negatively," Moody's said.

Moody's placed the U.S. credit rating on a negative outlook August 3, 2011 when the Congress and the White House wrestled over a relatively routine measure of raising the debt ceiling to the point where the United States was on the brink of default before hammering out a deal.

That political impasse and near financial calamity prompted rival rating agency Standard & Poor's to take the unprecedented move of cutting the U.S. credit rating to AA-plus from AAA.

This week's budget compromise " doesn't affect our view of the country's credit outlook, given that we believe yesterday's agreement does little to place the U.S.'s medium-term public finances on a more sustainable footing," S& P said in a statement on Wednesday.

While the budget deal does reduce the risk of a recession in the world's biggest economy, the agency said, sticking points remain, including the so-called sequestration, a sweeping package of potential budget cuts.

" Republicans have indicated they will demand more spending cuts, while the White House has hinted at a harder line than it took in 2011, when political brinksmanship nudged the country toward default on its debt," the rating agency said.

S& P has a negative outlook on the U.S. credit rating while Fitch Ratings, much like Moody's, maintains the country's AAA with a negative outlook.

Moody's says it expects the debt ceiling limit, which was reached on December 31 and now has the U.S. Treasury employing extraordinary measures to meet its financial commitments, to be raised.

It believes the risk of default on Treasury bonds is " extremely low" , but it does note that agreeing on an increase in the debt ceiling, which allows the U.S. to borrow more money to pay its obligations, will occur at the same time as debate on spending takes place.

" We will watch the process as it unfolds. The experience in 2011 shows that the debt ceiling can in fact become a negotiating tool. We're not sure what will happen in that regard," Hess said.

U.S. President Barack Obama has said he will not debate the debt ceiling this time around.

" I think this whole process has accelerated our ability to foresee the medium-term outlook in the sense that in February or March there will be significant actions on the expenditure side or not. We'll have a lot more information earlier in the year than we had expected," said Hess.

(Reporting by Caryn Trokie, Luciana Lopez and Daniel Bases Editing by Chizu Nomiyam, Leslie Gevirtz and Tim Dobbyn)

Australia shares seen extending gains

MELBOURNE, Jan 3 (Reuters) - Australian shares are likely to extend gains on Thursday after copper, gold, oil and U.S. stocks all spiked higher on relief after U.S. lawmakers signed off on a budget deal that averted fears the world's largest economy could slip into recession.

* Local share price index futures rose 28 points to 4,712, an 6 point premium to the underlying S& P/ASX 200 index close of 4,705.94.

* The benchmark index rose 1.2 percent to a 19-month high on Wednesday, its biggest one-day percentage gain in five months.

* New Zealand's benchmark NZX 50 index rose 0.7 percent to 4,095.4 as trade resumed after holidays.

* U.S. stocks kicked off the new year with their best day in over a year on relief over a last-minute deal in Washington to avert the " fiscal cliff" of tax hikes and spending cuts that threatened to derail economic growth.

* Miners such as BHP Billiton and Rio Tinto may extend their rally to 11-month highs after copper rose to its highest in more than two months.

* Gold producers such as Newcrest Mining and energy firms such as Woodside Petroleum may also attract buyers after broad gains across commodities. ----------------------MARKET SNAPSHOT @ 2144 GMT ------------

INSTRUMENT LAST PCT CHG NET CHG S& P 500 1462.42 2.54% 36.230 USD/JPY 87.24 0.66% 0.570 10-YR US TSY YLD 1.8353 -- 0.079 SPOT GOLD 1685.79 0.67% 11.250 US CRUDE 92.94 1.22% 1.120 DOW JONES 13412.55 2.35% 308.41 ASIA ADRS 136.05 2.71% 3.59 -------------------------------------------------------------

* Wall St rallies to kick off 2013 after 'cliff' deal * Oil rises on US fiscal deal, hits highest since Oct * Gold up after U.S. budget deal but seen vulnerable * Copper rallies on U.S. fiscal deal and China data

For a digest of the day's business stories in Australian newspapers, double click on (Reporting by Miranda Maxwell Editing by John Mair)

THE FINAL TALLY: Obama's Wins And Losses In The Fiscal Cliff Deal

On balance, President Obama came out a winner in the last-minute “fiscal cliff” deal that averted income-tax hikes on most Americans and postponed deep federal spending cuts.

Had the deal not passed Congress, both the White House and bipartisan leaders on Capitol Hill would have had egg on their faces.

The public would have had cause to blame Washington for yet another self-inflicted wound that threatened to send markets into a spiral and put both the US and global economies back into recession.

Republicans would have come in for bigger blame than the president, polls showed, but Mr. Obama, too, would have looked incompetent.

Instead, Obama delivered on his top reelection campaign promise: that the wealthiest taxpayers see an increase in their marginal income-tax rate in 2013. True, his definition of “wealthy” morphed significantly – from $250,000 to $450,000 in annual family income.

Late Tuesday night, after the House passed the bill, Obama persisted in saying that the bill he will sign into law “raises taxes on the wealthiest 2 percent of Americans,” when in reality, it’s more like the wealthiest 0.7 percent.

But those wealthiest taxpayers will see their top rate go back to where it was during the Clinton era – from 35 percent to 39.6 percent. During the negotiations, there had been talk of setting the top rate somewhere in between.

All told, the fiscal-cliff deal produces $620 billion in deficit reduction over 10 years, a down payment on what both sides agree needs to be much more. In the cold light of day, many Republicans disappointed by the tax increase agree that the alternative – no deal – would have been worse.

“The deal to avoid going over the so-called fiscal cliff was a lousy one: tax rate increases during a weak economy, no spending reductions, nothing on entitlement reform,” writes Peter Wehner, a former Bush White House official, on Commentary Magazine online.

“And yet if House Republicans had succeeded in derailing this deal, negotiated between Senator Mitch McConnell and Vice President Joe Biden, it would have been disastrous.”

But Obama’s victory is narrow. And by getting only a partial deal now, he faces a bigger fiscal cliff just a few weeks into his second term. In fact, there will be three cliffs: the deep spending cuts known as the “sequester” that come due (again) in two months the debt ceiling, which will prohibit new federal borrowing without congressional action, also in about two months and the expiration on March 27 of the continuing budget resolution – the short-term deal passed Oct. 27 that allows the federal government to keep spending money.

Those three anvils hanging over Washington’s head are likely to consume attention as the deadlines approach, creating a distraction from other matters Obama might want to address after his second inauguration on Jan. 21 – starting with gun violence and immigration reform.

Typically, reelected presidents begin their second terms with a bit of fresh political capital in the bank and about an 18-month window in which to accomplish anything. Fiscal matters could easily deplete Obama’s balance. And with each passing month, Congress becomes increasingly concerned about midterms – particularly House members, who face reelection every two years, and the one-third of the Senate that is up for reelection.

Immigration reform could be an exception: Republicans face a crisis in their declining Hispanic support, and the issue has shot to the top of their agenda. That, coupled with Obama’s longstanding pledge to enact comprehensive reform, could mean action, almost regardless.

But Obama has other fiscal-cliff negatives to overcome. He may, for example, pay a price for the pep rally he held next door to the White House on Dec. 31 in an auditorium packed with middle-class taxpayers. The event was meant to demonstrate, once again, his commitment to average Americans in making sure their taxes didn’t go up at midnight that night.

But it infuriated Republicans at the other end of Pennsylvania Avenue, and likely reduced any good feeling from the deal Mr. Biden cut with Senator McConnell (R) of Kentucky, the Senate minority leader.

Some analysts have suggested that Biden’s prominent role in solving the immediate fiscal cliff crisis, after Obama’s negotiations with House Speaker John Boehner came to naught, hurt Obama’s image as a leader. That may be true, but at least, it can argued, he deserves credit for his decision in 2008 to make Biden his running mate and place at his side an experienced Senate hand who could jump into the breach at just such a moment.

It was the Biden-McConnell deal – which passed the Senate by a lopsided 89-to-8 vote early Tuesday morning – that created the momentum necessary to keep enough House members (of both parties) in line to pass the bill late Tuesday.

On January 1, just before 2 AM, the Senate overwhelmingly agreed to pass a bill that will avert the Fiscal Cliff. The House approved it later that night.

The bill is pretty straightforward. Income tax rates will only rise on those making over $400K (liberals wanted $250K, GOP wanted no taxes to rise). Spending cuts will be delayed for 2 months to give the sides more time to address them.

So why is the bill 157-pages long?

Because when Washington does business and passes a huge bill, there are all kinds of little other pre-existing tax things most Americans have never heard of, but which needed to be extended, that also get into the bill. It's just how it works.

1. There's a provision extending a tax policy related to Puerto Rican rum.

2. And a tax credit for 2- and 3-wheel electric vehicles.

3. Something having to do with Diesel Fuel:

4. An extension of some special rules for the film and television business.

5. A gift to the car-racing world.

6. Help to asparagus farmers.

Some might think this is nefarious — that politicians see a huge bill and then sneak in all these random things.

The reality is more like these have been around for a while, and every time a big bill comes up about taxes expiring, they get extended too.

For the full text of the bill, see here >

What a great way to start the year.

First the scoreboard:

Dow: 13,412, +308.0, +2.3 percent
S& P 500: 1,462, +36.7, +2.5 percent
NASDAQ: 3,112, +92.2, +3.0 percent

And now the top stories:

> So, we finally got a fiscal cliff deal. Congress worked through the wee hours of New Year's Eve into the crack of New Year's Day. And last night, the House approved the deal, which among other things raises tax rates on individuals earning more than $400k and households earning more than $450.

> There's little doubt that the deal was behind the huge rally in the markets. However, there was also some strong economic data to reinforce optimism in the U.S. economy.

> The U.S. manufacturing purchasing managers index (PMI) jumped to 54.0 in December, according to Markit. This was up from 52.8 in November. Economists were looking for a reading of 53.6. " Firms are also taking on more staff, suggesting that the underlying improvement in demand pushed any worries about the ‘fiscal cliff’ to backs of manufacturers’ minds in the closing weeks of the year," said Markit Chief Economist Chris Williamson.

> The ISM Manufacturing index, which offers a similar glimpse into the U.S. manufacturing sector, also surprised to the upside. The headline number grew to 50.7 from 49.5 in November. Economists were looking for a reading of 50.4. From the report: " The Employment Index registered 52.7 percent, an increase of 4.3 percentage points, indicating a resumption of growth in employment following only one month of contraction since September 2009. Both the Exports and Imports Indexes registered 51.5 percent, returning both indexes to growth territory following consecutive periods of contraction of six and four months, respectively."

> Now that we have some fiscal cliff clarity, Wall Street is ratcheting up their forecasts for the S& P 500. In a new note to clients, Deutsche Bank's David Bianco boosted his year-end target to 1,575 from 1,500.

> One big are of weakness today was natural gas, which plunged by over 4 percent. New forecasts for a warm winter doesn't bode well for the heating commodity.

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

Market Euphoria Over Fiscal Cliff Deal Won't Last Long (Advisor Perspectives)

Global markets rallied after the House approved the fiscal cliff bill late last night. But Charles Lieberman at Advisors Capital Management warns that this euphoria won't last long. " The investment implications of the deal are quite positive for the near term, but far less clear looking out over a few months. Euphoria over avoiding the fiscal cliff should enable equities to perform well over the next several weeks, while bond yields should rise. Economic growth prospects have also improved. That’s precisely how the markets behaved on Monday, as the politicians appeared to be making progress towards a deal.

This euphoria won’t last long, however. Negotiations need to start soon, since late February will arrive fairly soon and politicians will be quite distracted over the next few weeks by the activities that normally surround the seating of a new Congress and the appointment of new key personnel in the Administration, such as Secretaries of State and Defense. The market volatility that we experienced in recent weeks should return by mid-February, as the budget battles resume."

The Most Important Finance Books Ever Written (Business Insider)

As we begin the new year, Business Insider published its list of the investment books that should top your reading list. This includes Benjamin Graham, 'The Intelligent Investor' which Warren Buffett has described as the best book about investing that has ever been written, George Soros, 'The Alchemy of Finance', and Charles Mackay's 'Extraordinary Popular Delusions and the Madness of Crowds'.

Morgan Stanley: The BRIC Era Is Over (Foreign Affairs)

Despite many still betting on emerging markets, Morgan Stanley's Ruchir Sharma writes that the BRIC era could be over. " The new normal in emerging markets will be much like the old normal of the 1950s and 1960s, when growth averaged around five percent and the race left many behind.

…There is a lot less foreign money flowing into emerging markets. The global economy is returning to its normal state of churn, with many laggards and just a few winners rising in unexpected places."

8 Forecasts For Fund Investors In 2013 (Marketwatch)

Chuck Jaffe at Marketwatch sees 8 trends in the mutual fund business in 2013. 1) Some big names could move into ETF's, something that Vanguard has a patent on till 2019, if the SEC allows them to. 2) Active mutual funds will be converted to ETFs. 3) " New ETFs will ignite a price war" . 4) " Renewed talk about 10-year returns" . 5) Reforming money funds. 6) Among investors, fund investors will be least-worried about changes in tax rates. 7) " A derivative blow up" . 8) Investors in bond funds will realize they aren't good safe havens.

Byron Wien Reveals Surprises For 2013 (Business Insider)

Byron Wien has published his ten surprises for 2013 that have an over 50 percent probability of happening, and that are bearish for American investors. These surprises include the S& P falling below 1,300, crude oil tumbling to $70 a barrel, the Shanghai Composite surging over 20 percent on reforms and steady growth in China.

New Book 'Pound Flesh' Slams The Financial Advice Industry (Investment News)

Pound Foolish the latest book by Helaine Olen slams the financial advice industry. Olen argues that advisers aren't usually on the side of their clients, lambasts " personal finance-celebrities" , and writes that the rise of the industry has come hand in hand with a stagnation in salaries, poor pensions and the rising cost of education and health care.

Will the Dow Soar or Plunge in 2013?

The New Year is finally here, and after a reasonably good performance for the Dow Jones Industrials (DJINDICES: ^DJI ) in 2012, investors are hoping for more of the same as the bull market tries to go beyond the four-year mark. Yet while some market prognosticators think the market has plenty of room to run, others are placing their bets on a pullback.

Let's take a look at a couple market analysts and the calls they've made, along with the justifications they've advanced for their opinions. At the end of the article, you can weigh in with your own views in our Fool poll, and leave a comment with your exact prediction for where the Dow will end 2013.

Jeremy Siegel: Bet on Dow 17,000 in 2013
Jeremy Siegel has been a long-term bull on the stock market for a long time. The Wharton finance professor has made the stock market his life study, looking at the history of stocks going back a couple of centuries.

Siegel argued back in October that the fiscal cliff would inspire unusual cooperation across party lines in Congress, with tax and entitlement reform. Yet he wasn't unrealistic with his expectations about timing, as he believed that a one-year short-term extension would give politicians time to move forward with more dramatic law changes.

Meanwhile, Siegel thinks that growth in the U.S. economy will accelerate to a 3% to 3.5% annual pace, thanks largely to housing and consumer sentiment. If the economy can ignore dysfunctional politics, then business activity could make the case for a rising market all by itself. Adding simplicity to the tax code through eliminating deductions could allow tax rates to fall while still addressing the U.S. budget issues.

What sets Siegel apart from many of his bullish peers is that his analysis takes the truly long-run view. He bases his current view that the stock market is cheap less on quarterly earnings or economic forecasts and more on the fact that he's never seen a 20-year period in which inflation-adjusted returns on U.S. stocks were below zero, and most of the time, stocks have beaten alternatives like bonds and gold soundly over those two-decade periods. With the Dow below its long-run average, Siegel irons out the daily rises and falls of the market and argues that long-range strategy supports owning stocks.

Harry Dent: Dow could drop as low as 3,000
Harry Dent is no stranger to big predictions. In a 1993 book, The Great Boom Ahead, Dent argued that demographic trends would support huge gains for stocks as members of the baby boom generation entered the highest-consumption years of their lifetimes. Yet now, according to Dent, those trends are reversing themselves, as baby boomers have grown older and shifted away from consumption and toward saving. He sees the Dow falling to between 3,000 and 5,000 in a coming crash.

Meanwhile, even as the Federal Reserve has tried encouraging more spending and discouraging saving with low interest rates, it has also tried to stop what Dent sees as a painful but necessary deleveraging that will make traditional elements of standards of living like housing affordable to young families. Dent believes that these downward trends will last until 2023, when the so-called echo boom starts to perk up again.

To be fair, Dent isn't certain the crash will come in 2013, and he wrote The Great Crash Ahead back in 2011. But he does think something should happen in the next two to three years, and he told Bloomberg back in September that he expected to short the market in December or January. Moreover, although he thinks emerging markets have better demographics, he doesn't think they'll fare much better given the close links among global economies. That's certainly consistent with what happened in 2008, when iShares FTSE China (NYSEMKT: FXI ) , Templeton Russia and Eastern European Fund (NYSE: TRF ) , and iShares MSCI Brazil (NYSEMKT: EWZ ) all posted losses in line or even worse than the S& P 500 (SNPINDEX: ^GSPC ) .

Dent isn't alone in his views that demographics are important Robert Arnott has also clued into the importance of the aging population in his market views, which he shared with Fool contributor Morgan Housel recently. Much depends on how the U.S. government responds to the many challenges that demographic issues raise.

Where will the Dow finish 2013?
Most of the time, extreme views turn out to be wrong. Seeing the Dow rise to 17,000 or fall to 3,000 would both be low-probability events, albeit within the realm of possibility. More likely, though, the end of the year will put us somewhere in between those two views.

What do you think? Weigh in by answering the poll below, and give us your more precise estimate in the comments. May the New Year make your investing expectations come true!

Get some smart long-term investing ideas by accepting this invitation to read the Fool's popular special report: " The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so just click here and get your copy today.

Take the Motley Poll

Below 11,000.
11,000 to 12,500.
12,500 to 13,500.
13,500 to 15,000.
Above 15,000.

Samsung revealed the cancellation in a regulatory filing on the Korea Exchange this week but did not identify the Asian client.

Samsung said the unnamed client had delayed the delivery date for the unit, which was originally ordered in 2007, after the global financial crisis as it tried to secure financing and a charter for the vessel.

The delivery date of the FPSO was originally pushed back from September 2010 until the end of 2012 before the order was cancelled in late December.

U.S. " fiscal cliff" plan headed for crucial vote Tuesday

By Kim Dixon and Thomas Ferraro

WASHINGTON (Reuters) - The U.S. House of Representatives looked set to end the " fiscal cliff" crisis in a vote on Tuesday night on a bipartisan deal meant to prevent Washington from pushing the world's biggest economy into recession.

After a day of deliberation, there appeared to be enough Republicans in the House ready to back a Senate bill that would raise taxes on the wealthiest Americans and close a crucial chapter of the budget dispute that has consumed Washington for months.

" We've gone as far as we can go and I think people are ready to bring it to a conclusion," Republican Representative Jack Kingston of Georgia said. " We fought the fight."

Rules Committee Chairman David Dreier, a Republican, predicted the House would back the Senate bill, which also postpones for two months $109 billion (67 billion pounds) in spending cuts on military and domestic programs set for 2013.

Lawmakers have struggled to find a way to head off across-the-board tax hikes and spending cuts that began to take effect at midnight, a legacy of earlier failed budget deals that is known as the fiscal cliff.

Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to produce legislation to halt $600 billion of tax hikes and spending cuts scheduled for this year that started kicking in on January 1.

While many Republicans were uneasy with the tax hikes and wanted more spending cuts in the bill, they seemed to realize that the fiscal cliff would begin to damage the economy once financial markets and federal government offices returned to work on Wednesday. Opinion polls show the public would blame Republicans if a deal were to fall apart.

The House Republicans had earlier considered adding $330 billion in spending cuts over 10 years to the Senate bill, which raises taxes on the wealthiest U.S. households by $620 billion over the same period.

But Senate Democrats refused to consider any changes to their bill, which passed 89 to 8 in a rare display of unity early Tuesday morning.

(Additional reporting by Rachelle Younglai, Thomas Ferraro and David Lawder Writing by Andy Sullivan Editing by Alistair Bell and Eric Beech)

Economy: Singapore's GDP unexpectedly grew 1.8% qoq in seasonally adjusted and annualized terms in 4Q12, besting analysts' predictions of a fourth-quarter contraction and escaping the designation of recession.

The outcome is in contrast to the 1.0% contraction predicted by Dow Jones consensus and compares with a 6.3% contraction in 3Q12.

Output in the manufacturing sector fell 1.5% yoy in 4Q12 vs a 1.6% contraction in the previous quarter. Services sector output grew 1.5% yoy, while the construction sector expanded 5.9%.

The economy expanded only 1.2% for the full year, a figure revealed by PM Lee in a Monday speech.

The govt expects growth to remain sluggish between 1% and 3% in 2013.

Singapore market: may rise on the first trading day of 2013, amid renewed optimism about a deal among U.S. lawmakers to avert higher taxes and reduced spending this year.

Sias says, the optimism is fuelled by the hope of a possible deal, from the U.S politicians to avert the fiscal cliff. Adds, sentiment may get a further lift from positive manufacturing PMI data from China, adding evidence that the recovery in the world's second biggest economy will extend into the new year.

On Monday, the STI closed 0.8% lower at 3,167.08 the STI rose 19.7% in 2012.

Sias sees immediate resistance pegged at 3,194 while support is between 3,139 and 3,150.

GLOBAL MARKETS-Asia holds breath as U.S. fiscal talks go to the wire

STOCKS TO WATCH -- SC GLOBAL DEVELOPMENTS LTD - SC Global Developments' chief executive officer and chairman Simon Cheong's stake in the company increased to 63.7 percent from 60.9 percent after acceptances of his voluntary unconditional cash offer for the remaining shares in the company.

Wall St ends 2012 riding high on " cliff" deal optimism

US bond prices end year lower as fiscal deal seen near

Dollar rises in thin trade, ends 2012 lower overall [USD/] > Gold up 6 pct in 2012 rallies late on US fiscal deal

Brent crude rises, hits record annual average for 2012

Reporting by Charmian Kok Editing by Paul Tait

A cockroach Deal

inside toilet room

Not Fiscal cliff deal.

krisluke ( Date: 01-Jan-2013 14:56) Posted:

Democratic officials: Fiscal 'cliff' deal reached

WASHINGTON —

Racing the clock, the White House sealed a New Year's Eve accord with Senate Republicans late Monday to neutralize across-the-board tax increases and spending cuts in government programs due to take effect at midnight, according to administration and Democratic officials.

Under the deal, taxes would remain steady for the middle class and rise at incomes over $400,000 for individuals and $450,000 for couples - levels higher than President Barack Obama had campaigned for in his successful drive for a second term in office.

Spending cuts totaling $24 billion over two months aimed at the Pentagon and domestic programs would be deferred. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of Medicare and other government benefit programs.

Officials also decided at the last minute to use the measure to prevent a $900 pay raise for lawmakers due to take effect this spring.

Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the administration and lawmakers spent the final hours of 2012 haggling over long-festering differences.

" One thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second," the president said in a mid-afternoon status update on the talks.

As darkness fell on the last day of the year, Obama, Biden and their aides were at work in the White House, and lights burned in the House and Senate. Democrats complained that Obama had given away too much in agreeing to limit tax increases to incomes over $450,000, far above the $250,000 level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.

Democratic senators said they expected a post-midnight vote on the measure. They spoke after a closed-door session with Vice President Joseph Biden, who brokered the deal with Senate Republican leader Mitch McConnell.

" The argument is that this is the best that can be done on a bipartisan basis," said Sen. Dianne Feinstein, D-Calif., when asked about the case the vice president had delivered behind closed doors.

Passage would send the measure to the House, where Speaker John Boehner, R-Ohio, refrained from endorsing a package as yet unseen by his famously rebellious rank-and-file. He said the House would not vote on any Senate-passed measure " until House members - and the American people - have been able to review" it.

Numerous GOP officials said McConnell and his aides had kept the speaker's office informed about the progress of the talks.
The House Democratic leader, Rep. Nancy Pelosi of California, issued a statement saying that when legislation clears the Senate, " I will present it to the House Democratic caucus."

Without legislation, economists in and out of government warned of a possible recession if the economy were allowed to fall over a fiscal cliff of tax increases and spending cuts.

And while the nominal deadline for action passed at midnight, Obama's signature on legislation by the time a new Congress takes office at noon on Jan. 3, 2013 - the likely timetable - would eliminate or minimize any inconvenience for taxpayers.

A late dispute over the estate tax produced allegations of bad faith from all sides.

After hours of haggling, Biden headed for the Capitol to brief the Democratic rank and file.

Earlier, McConnell had agreed with Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and " continue to work on finding smarter ways to cut spending" next year.

The White House and Democrats initially declined the offer, preferring to prevent the cuts from kicking in at the Pentagon and domestic agencies alike. A two-month compromise resulted.

Officials in both parties said the agreement would prevent tax increases at incomes below $400,000 for individuals and $450,000 for couples.

At higher levels, the rate would rise to a maximum of 39.6 percent from the current 35 percent. Capital gains and dividends in excess of those amounts would be taxed at 20 percent, up from 15 percent.

The deal also would also raise taxes on the portion of estates exceeding $5 million to 40 percent. At the insistence of Republicans, the $5 million threshold would rise each year with inflation.

Much or all of the revenue to be raised through higher taxes on the wealthy would help hold down the amount paid to the Internal Revenue Service by the middle class.

In addition to preventing higher rates for most, the agreement would retain existing breaks for families with children, for low-earning taxpayers and for those with a child in college.

Also, the two sides agreed to prevent the alternative minimum tax from expanding to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000. The law originally was designed to make sure millionaires did not escape taxes, but inflation has gradually exposed more and more households with lower earnings to its impact.

The legislation leaves untouched a scheduled 2 percentage point increase in the payroll tax, ending a temporary reduction enacted two years ago to help revive the economy.

Officials said the White House had succeeded in gaining a one-year extension of long-term unemployment benefits about to expire on an estimated two million jobless.

It was unclear whether the legislation would prevent a 27 percent cut in fees for doctors who treat Medicare patients was unknown.

Also included is a provision to prevent a threatened spike in milk prices after the first of the year.

Even as time was running out, partisan agendas were evident.

Obama used his appearance not only to chastise Congress, but also to lay down a marker for the next round of negotiations early in 2013, when Republicans intend to seek spending cuts in exchange for letting the Treasury to borrow above the current debt limit of $16.4 trillion.

" Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone - and you hear that sometimes coming from them ... then they've got another think coming. ... That's not how it's going to work at least as long as I'm president," he said.

" And I'm going to be president for the next four years, I think," he added. Obama's remarks irritated some Republicans.
Sen. John McCain of Arizona they would " clearly antagonize members of the House."

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Associated Press writers Julie Pace, Andrew Taylor, Alan Fram and Ben Feller contributed to this report.

the sky's the limt for STI in 2013!!!

Huat ah!!!