Record temps, heavy rain, possible flooding Tuesday

CAPTIONS

Warming weather in Chicago
Georgina Salgado, left, and Jacinto Oreja, take advantage of the warming weather on Monday to take their five dogs for a walk on the 63rd Street Beach. (Michael Tercha, Chicago Tribune /January 28, 2013)

Staff report

3:44 p.m. CST, January 28, 2013

The work week begins with mild weather after the frigid cold and Sunday's wintry mix, with potentially record temperatures and heavy rain with possible flooding Tuesday.

Temperatures will start to climb tonight after peaking in the mid-40s, and by Tuesday they'll hit the mid-60s, according to the weather service. The record high for Jan. 29 in Chicago is 59 degrees set in 1914.

Tuesday will hardly be a day at the beach, though: Heavy rain and thunderstorms are expected starting in the afternoon, and the brewing storm has prompted the weather service to issue a hazardous weather outlook, warning of lightning, fog, downpours and hail.

It has also issued a flood watch from Tuesday morning through Tuesday evening for Cook, Ford, Grundy, Iroquois, Kankakee, Livingston and Will counties in Illinois and Benton, Jasper, Lake, Newton and Porter counties in northwest Indiana.

With frozen ground and predictions of as much as two inches of rain in an area around a line stretching from Pontiac to Gary, the agency warns that a lot of that rain could end up running off into local rivers and streams that can rapidly overflow their banks.

chicagobreaking@tribune.com

Twitter: @ChicagoBreaking

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Egypt protesters defy curfew after emergency rule imposed

ISMAILIA/CAIRO, Egypt (Reuters) - Thousands of Egyptian protesters ignored a curfew on Monday to take to the streets in cities along the Suez canal, defying a state of emergency imposed by Islamist President Mohamed Mursi to end days of violence that has killed at least 51 people.

One man was killed in violence late on Monday in Port Said and another was shot dead earlier in Cairo as a wave of violence raged on, unleashed last week on the eve of the two-year anniversary of the popular revolt that brought down autocrat Hosni Mubarak.

Political opponents spurned a call by Mursi for talks to try to end the violence, with main opposition groups refusing to attend a meeting.

Instead, huge crowds of protesters took to the streets in the capital Cairo, Alexandria and in the three Suez Canal cities - Port Said, Ismailia and Suez - where Mursi imposed emergency rule and a curfew on Sunday.

"Down, down with Mohamed Mursi! Down, down with the state of emergency!" crowds shouted in Ismailia in defiance of the curfew. In Cairo, flames lit up the night sky where protesters set police vehicles ablaze.

In Port Said, men attacked police stations after dark. A security source said some police and troops were injured. A medical source said one man was killed in clashes.

"The people want to bring down the regime," crowds chanted in Alexandria. "Leave means go, and don't say no!" they shouted.

The demonstrators accuse Mubarak's successor Mursi of betraying the revolution that brought down Mubarak. Mursi and his supporters accuse the protesters of seeking to overthrow the country's first ever democratically elected leader through undemocratic means.

Monday was the second anniversary of one of the bloodiest days in the revolution, which erupted on January 25, 2011 and ended Mubarak's iron rule 18 days later.

The past two years have seen the Islamists win two referendums, two parliamentary elections and a presidential vote. But that legitimacy has been challenged by an opposition that accuses Mursi of imposing a new form of authoritarianism, and punctuated by repeated waves of unrest that have prevented a return to stability in the most populous Arab state.

The army has already been deployed in Port Said and Suez and the government agreed a measure to let soldiers arrest civilians as part of the state of emergency.

A cabinet source told Reuters any trials would be in civilian courts, but the step is likely to anger protesters who accuse Mursi of using tactics like those used by Mubarak.

VOLLEYS OF TEARGAS

Propelled to the presidency in a June election by the Muslim Brotherhood, Mursi has lurched through a series of political crises and violent demonstrations while trying to shore up the economy and of prepare for a parliamentary election to cement the new democracy in a few months.

The instability unnerves Western capitals, where officials worry about the direction of a key regional player that has a peace deal with Israel. The United States condemned the deadly violence and called on Egyptian leaders to make clear violence is not acceptable. ID:nW1E8MD01C].

In Cairo on Monday, police fired volleys of teargas at stone-throwing protesters near Tahrir Square, cauldron of the anti-Mubarak uprising. Protesters stormed into the down town Semiramis Intercontinental hotel and burned two police vehicles.

A 46-year-old bystander was killed by a gunshot early on Monday, a security source said. It was not clear who fired.

"We want to bring down the regime and end the state that is run by the Muslim Brotherhood," said Ibrahim Eissa, a 26-year-old cook, protecting his face from teargas wafting towards him.

The political unrest has been exacerbated by street violence linked to death penalties imposed on soccer supporters convicted of involvement in stadium rioting in Port Said a year ago.

As part of emergency measures, a daily curfew will be imposed on the three canal cities from 9 p.m. (1900 GMT) to 6 a.m. (0400 GMT).

The president announced the measures on television on Sunday: "The protection of the nation is the responsibility of everyone. We will confront any threat to its security with force and firmness within the remit of the law," Mursi said.

His demeanor in the address infuriated his opponents, not least when he wagged a finger at the camera.

He offered condolences to families of victims. But his invitation to Islamist allies and their opponents to hold a national dialogue was spurned by the main opposition National Salvation Front coalition. Those who attended were mostly Mursi's supporters or sympathizers.

SENDING A MESSAGE

The Front rejected the offer of talks as "cosmetic and not substantive" and set conditions for any future meeting that have not been met in the past, such as forming a government of national unity. The group also demanded that Mursi declare himself responsible for the bloodshed.

"We will send a message to the Egyptian people and the president of the republic about what we think are the essentials for dialogue. If he agrees to them, we are ready for dialogue," opposition politician Mohamed ElBaradei told a news conference.

The opposition Front has distanced itself from the latest flare-ups but said Mursi should have acted far sooner to impose security measures that would have ended the violence.

"Of course we feel the president is missing the real problem on the ground, which is his own policies," Front spokesman Khaled Dawoud said after Mursi made his declaration.

Other activists said Mursi's measures to try to impose control on the turbulent streets could backfire.

"Martial law, state of emergency and army arrests of civilians are not a solution to the crisis," said Ahmed Maher of the April 6 movement that helped galvanize the 2011 uprising. "All this will do is further provoke the youth. The solution has to be a political one that addresses the roots of the problem."

Rights activists said Mursi's declaration was a backward step for Egypt, which was under emergency law for Mubarak's entire 30-year rule. His police used sweeping arrest provisions to muzzle dissent and round up opponents, including members of the Brotherhood and even Mursi himself.

Heba Morayef of Human Rights Watch in Cairo said the police, still hated by many Egyptians for their heavy-handed tactics under Mubarak, would once again have the right to arrest people "purely because they look suspicious", undermining efforts to create a more efficient and respected police force.

"It is a classic knee-jerk reaction to think the emergency law will help bring security," she said. "It gives so much discretion to the Ministry of Interior that it ends up causing more abuse, which in turn causes more anger."

(Additional reporting by Yasmine Saleh in Cairo, Yusri Mohamed in Ismailia and Abdelrahman Youssef in Alexandria; Editing by Peter Graff)

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Fed waits for job market to perk up

LONDON (Reuters) - The Federal Reserve's ultra-loose monetary policy is a root cause of the "currency wars" that some see as a looming threat to the world economy, but don't expect the U.S. central bank to signal a shift back to normal any time soon.

The Fed, whose policy-setting Federal Open Market Committee concludes a two-day meeting on Wednesday, said just last month that it expects to keep short-term interest rates exceptionally low until the U.S. unemployment rate falls to 6.5 percent, inflation permitting.

That goal is still distant. Figures on Friday are likely to show that the jobless rate was unchanged in January at 7.8 percent, while the economy created 155,000 jobs, the same as in December, according to economists polled by Reuters.

So it would be a huge surprise if the Fed were to do anything other than reaffirm last month's decision to anchor short-term interest rates in a range of zero to 0.25 percent and to keep buying $85 billion of bonds each month to hold down long-term rates.

The only question mark is whether the FOMC vote will be unanimous now that Richmond Fed President Jeffrey Lacker, who opposes the current round of bond-buying, has rotated off the panel, said Harm Bandholz, an economist with UniCredit Bank in New York.

Most economists polled by Reuters expect the Fed to keep its open-ended bond-buying program in place well into next year, even though the economic news flow and market confidence are improving markedly.

True, Wednesday's preliminary report on fourth-quarter GDP is likely to show that growth slowed to an annualized rate of 1.2 percent from 3.1 percent in the July-September period.

And the current quarter will also be soft as the expiry of a 2 percent payroll tax cut is dampening consumer spending.

But then Bandholz expects an average growth rate of 2.8 percent over the rest of the year. That would be the strongest three-quarter period of the recovery so far, he said.

"The outlook has improved a lot in the U.S. I've been on the cautious side for the last three years, but this time I'm a bit more bullish," he said.

THE FED BIDES ITS TIME

The recovery in housing would add at least half a percentage point to GDP growth in 2013, while capital spending was likely to revive now that uncertainty over budget talks in Washington had been largely allayed, Bandholz said.

"There's a lot of pent-up demand in the system. I don't think all these investments have been abandoned; they've just been postponed," he said.

At some point, investors' exuberance over the super-easy stance of the world's major central banks will give way to worries that they are about to take away the punch bowl.

Gustavo Reis, an economist with Bank of America Merrill Lynch in New York, said concerns about the costs of money-printing were likely to spread but would be offset by uncertainty over the impact on growth of fiscal tightening in the United States and Europe.

"All told, although global activity seems more robust now than at any point in 2012, we expect policymakers to continue to worry predominantly about downside risks," he said in a note.

The bank does not expect the Fed to consider halting asset purchases before 2014, while the latest episode of monetary easing announced by the Bank of Japan is likely to be ‘long-lived and significant'.

Many economists argue that bold monetary action is long overdue in Japan, whose nominal output has not grown in 20 years, saddling the government with a debt-to-GDP ratio of more than 220 percent.

But Douglas McWilliams, who heads the Centre for Economics and Business Research, a London consultancy, fears Japan's decision will lead the global economy into unpredictable currency wars.

"It's a bit like if someone's rude to you, you're rude to them back. You get tit-for-tat behavior," McWilliams said.

CURRENCY FRICTION, BUT NO WAR

Olivier Blanchard, the chief economist of the International Monetary Fund, last week called talk of currency wars overblown and said countries had to pull the right policy levers to get their economies back on track, with corresponding consequences for exchange rates.

However, McWilliams said the problem was that it was difficult to get countries to agree NOT to wage currency wars.

Tellingly, Chancellor Angela Merkel voiced German concerns last week that Japan might be deliberately seeking to cheapen the yen to give its exporters a competitive edge.

"So we may well find that there is a period of very heavy volatility before the authorities involved try and get some kind of agreement," McWilliams said.

In a relatively quiet week for economic data in the euro zone - money supply figures and confidence surveys from the European Commission are the highlights - the focus is likely to remain squarely on the euro, which has been rising briskly as traders price in the policy shifts that Blanchard had in mind.

While the Fed and the Bank of Japan are expanding their balance sheets, the European Central Bank is starting to soak up some of the emergency cash it lent to banks a year ago.

The central bank said on Friday that banks would repay early 137 billion euros of cheap borrowed money.

"I'm not sure if we have too strong a euro for the moment but certainly we would not want to see a currency war of competitive devaluations which would have a negative effect on the euro," the European Union's top monetary official, Olli Rehn, told Reuters.

(Additional reporting by Paul Taylor in Davos; editing by Jason Neely)

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Djokovic completes Australian Open hat trick

MELBOURNE, Australia (AP) — No shirt ripping or bare-chested flexing this time.

Novak Djokovic completed his work before midnight, defeating Andy Murray in four sets for his third consecutive Australian Open title and fourth overall.

It was also the second time in three years Djokovic had beaten his longtime friend in this final. So the celebration was muted: a small victory shuffle, raised arms, a kiss for the trophy. No grand histrionics, although that's not to say the moment was lost on him.

"Winning it three in a row, it's incredible," Djokovic said after his 6-7 (2), 7-6 (3), 6-3, 6-2 victory Sunday night. "It's very thrilling. I'm full of joy right now. It's going to give me a lot of confidence for the rest of the season, that's for sure."

Nine other men had won consecutive Australian titles in the Open era, but none three straight years. One of them was Andre Agassi, who presented Djokovic with the trophy.

A year ago, Djokovic began his season with an epic 5-hour, 53-minute five-set win over Rafael Nadal at the Australian Open, the longest Grand Slam final. He tore off his shirt to celebrate, the TV replays repeated constantly at this tournament.

He mimicked that celebration after coming back to beat Stanislas Wawrinka in five hours in a surprisingly tough fourth-round victory this time.

Since then, he's looked every bit the No. 1 player. He said he played "perfectly" in his 89-minute win over fourth-seeded David Ferrer in the semifinals Thursday night. Murray struggled to beat 17-time major winner Roger Federer in five sets in the semifinals Friday night, and still had the bad blisters on his feet to show for it in the final.

In a final that had the makings of a classic when two of the best returners in tennis were unable to get a break of serve in the first two sets that lasted 2:13, the difference may have hinged on something as light as a feather.

Preparing for a second serve at 2-2 in the second set tiebreaker, Murray was rocking back about to toss the ball when he stopped, paused and then walked onto the court and tried to grab a small white feather that was floating in his view. He went back to the baseline, bounced the ball another eight times and served too long.

After being called for a double-fault, Murray knocked the ball away in anger and flung his arm down. He didn't get close for the rest of the tiebreaker and was the first to drop serve in the match — in the eighth game of the third set. Djokovic broke him twice in the fourth set, which by then had turned into an easy march to victory.

"It was strange," said Djokovic, adding that it swung the momentum his way. "It obviously did. ... He made a crucial double-fault."

Murray didn't blame his loss on the one distraction.

"I mean, I could have served. It just caught my eye before I served. I thought it was a good idea to move it," he said. "Maybe it wasn't because I obviously double-faulted.

"You know, at this level it can come down to just a few points here or there. My biggest chance was at the beginning of the second set — didn't quite get it. When Novak had his chance at the end of the third, he got his."

Djokovic had five break-point chances in the opening set, including four after having Murray at 0-40 in the seventh game, but wasn't able to convert any of them.

Then he surrendered the tiebreaker with six unforced errors. Murray appeared to be the stronger of the two at the time. He'd beaten Djokovic in their last Grand Slam encounter, the U.S. Open final, and had the Serb so off balance at times in the first set that he slipped to the court and took skin off his knee.

Murray held serve to open the second set and had three break points at 0-40 in the second game, but Djokovic dug himself out of trouble and held.

"After that I felt just mentally a little bit lighter and more confident on the court than I've done in the first hour or so," Djokovic said. "I was serving better against him today in the first two sets than I've done in any of the match in the last two years."

Djokovic said he loves playing at Rod Laver Arena, where he won his first major title in 2008. He now has six Grand Slam titles altogether. Federer has won four of his 17 majors at Melbourne Park, and Agassi is the only other player to have won that many in Australia since 1968.

Djokovic was just finding his way at the top level when Agassi retired in 2006, but he had watched enough of the eight-time major winner to appreciate his impact.

"He's I think one of the players that changed the game — not just the game itself, but also the way the people see it," Djokovic said. "So it was obviously a big pleasure and honor for me to receive the trophy from him."

Agassi was among the VIPs in the crowd, along with actor Kevin Spacey and Victoria Azarenka, who won the women's final in three sets against Li Na the previous night.

Murray broke the 76-year drought for British men at the majors when he won the U.S. Open last year and said he'll leave Melbourne slightly more upbeat than he has after defeats here in previous years.

"The last few months have been the best tennis of my life. I mean, I made Wimbledon final, won the Olympics, won the U.S. Open. You know, I was close here as well," he said. "No one's ever won a slam (immediately) after winning their first one. It's not the easiest thing to do. And I got extremely close.

"So, you know, I have to try and look at the positives of the last few months, and I think I'm going the right direction."

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Women in infantry: Tough challenge?

Hospital Corpsman Shannon Crowley packs for a mission as Lance Cpl.. Kristi Baker sits on her bed in 2010 in Afghanistan.

STORY HIGHLIGHTS

• Maren Leed: Ban on women in combat has hurt operations, women's promotion


• Leed: Integrating women into the physically demanding infantry presents challenges


• Women are already in combat; she says, the "front line" and "rear line" no longer exist


• Leed: Research into women in infantry might show that some limits might be appropriate

Editor's note: Maren Leed is senior adviser, Harold Brown Chair in defense policy studies at the Center for Strategic and International Studies. From 2011 to 2012, she served as senior adviser to the chief of staff of the U.S. Army. Follow the Center for Strategic and International Studies on Twitter.

(CNN) -- In the coming years, lifting the ban on women in combat, announced Thursday by Defense Secretary Leon Panetta, might prove particularly challenging in the most iconic of military occupations -- the infantry, among the most physically demanding and tradition-bound branches of the Marines and the Army.

Determining the best path forward to integrate women into this elite group will require hard-nosed honesty, careful management and compelling leadership.

For the 65 years that women have enjoyed a permanent place in the United States military, they have been subject to restrictions. One rationale is the notion embedded in our culture that women should be shielded from great physical risks. Another is a recognition of the physical superiority of the average male over the average female. A third is the fear that unit cohesion, critical to military performance, would suffer with the introduction of women.

Maren Leed

These three concerns apply to varying degrees in the infantry. But the last 11 years of war have clearly demonstrated that warfare is no longer waged in a linear fashion, and that the concept of "front line" no longer applies.

Opinion: A more equal military? Bring back draft

Historically, logistics operations were conducted "in the rear," where risks were comparatively low. This has changed: In 2006 in Iraq, for example, one in every five truck convoys was attacked. Although infantry clearly remains one of the most dangerous military occupations, the proliferation of homemade bombs and other low-cost, lethal weaponry and tactics have heightened the risk of almost every occupation. War is more uniformly dangerous.

That said, physical differences between the sexes remains a thorny issue. Determining gender-neutral physical standards for an integrated infantry will be one of the most difficult tasks ahead.

Infantry soldiers and Marines are the primary forces for operations on foot. They not only travel long distances, but also frequently carry loads in excess of 50 pounds. Both the short- and long-term health effects of such demands can be significant.

Single mom fought alongside combat troops in Afghanistan

The Defense Department has consistently pursued solutions to lighten the load, from exoskeletons to unmanned vehicles that would serve as "pack mules," to the elusive quest for higher power, lower weight batteries.

The success of these efforts will benefit both men and women. But until that happens, research into the effects these physical demands have on women is necessary before determining the degree to which they can, and should, be part of the full range of infantry.

Whether men serving in the infantry will accept women as peers is another open question.

Those who oppose women in the infantry argue that they would change group dynamics, disrupt bonding and ultimately harm unit cohesion. In the past, these fears have been brought up regarding the participation of minorities and homosexuals, too. But data show these negative predictions don't come true. Instead, successful integration has happened with strong leadership, and, critically, a process that is broadly perceived to be fair.

Opinion: Women in combat a dangerous experiment

Even if the arguments underpinning the ban on women in combat have weakened, is there sufficient justification for change? The Joint Chiefs apparently believe so, as they have unanimously recommended the ban be lifted.

Each of the services already has been taking steps along these lines. This is in part driven by the evolution of the battlefield. When today's senior leaders were serving time in Iraq and Afghanistan, they realized that the restrictions on women sometimes also restricted their missions.

They implemented work-arounds and sought exceptions to policy. But they came home with firsthand experience of the mismatch between modern warfare and the policies limiting women's role. Women are in combat, and senior military leaders believe that future success demands they must remain available to be so, in even greater numbers.

From the institutional viewpoint, there are also concerns that the traditional limitations fail to make the best use of women in the service. Combat experience weighs heavily in promotion decisions, and restrictions have precluded women from gaining experiences equal to those of male counterparts.

Women are also excluded from many of the occupations disproportionately represented in senior leadership, and that automatically limits the number of women who can advance to the highest levels. At the same time, the pool of Americans eligible for military service is shrinking, and competition for high-quality recruits is intensifying. So it's imperative that the military fully leverage the talent of the men and women it has and that it seeks to attract.

By the numbers: Women in the U.S. military

The arguments in favor of lifting the ban on women in combat outweigh those against it. Despite Defense Secretary Leon Panetta's announcement on Thursday, the military services maintain the prerogative to preclude women from serving in certain positions or occupations.

Infantry, or at least some specialties within that branch, could well be a case in which restrictions are warranted. But military leaders have time to evaluate this proposition, and to set the conditions to make any change stick. The path ahead may not be smooth, but it is necessary.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Maren Leed.

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Freezing rain, fog expected to complicate roadways

The National Weather Service has issued a freezing rain advisory for northeast Illinois that warns of an ice storm that is expected to last until 9 p.m. this evening.

A mix of snow, sleet and freezing rain hit the Chicago area around noon, but there have been no reports of any major accumulation, said Bill Nelson, a meteorologist with the National Weather Service. Still, Nelson warned that a heavy fog will roll in after 7 p.m. tonight and could last until mid to late Monday morning.

According to the agency, the region was going to be hit with freezing rain, possibly mixed with sleet, that will turn to rain as the temperatures rise above freezing in later afternoon or early evening. The agency warns of ice accumulation, up to a tenth-of-an-inch or two, making travel hazardous and possibly leading to downed tree limbs and power lines.

Because the ground is below freezing, the precipitation will freeze on contact, the agency said, leaving sidewalks as well as streets with that potentially dangerous coating of ice.

Forecasters don't expect the storm to have any major lasting effects other than a widespread, dense fog that could pose trouble for drivers once it arrives later tonight.

"We just urge everybody to exercise caution and take things slow," Nelson said.

Much of the ice from today will likely melt as temperatures in the Chicago area reach the mid-30s overnight and slowly increase to the upper 40s by Monday, according to forecasters. Nelson added that it is normal for a heavy fog to appear when cold air is replaced with warmer air and moisture.

Meanwhile, some city and state agencies have already deployed crews to salt streets as the ice storm continues. The city's streets and sanitation department earlier today deployed its full feet of 284 plows to salt main streets, including Lake Shore Drive, and residential roads.

The state's transportation agency has 360 trucks in the northeastern part of Illinois ready to salt roads as soon as precipitation hits the area, said Mike Claffey, a spokesman for the Illinois Department of Transportation.

IDOT will be monitoring weather conditions, but roads will likely be slick this afternoon when the ice storm arrives, Claffey said. He also cautioned drivers to stay off the roads.

"It's going to be very slippery, tricky driving conditions," Claffey said. "If you don't have to be out, you should not be."

jmdelgado@tribune.com

Twitter: @jendelgado1

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Nightclub fire kills at least 232 in Brazil

SANTA MARIA, Brazil (Reuters) - A nightclub fire killed at least 232 people in southern Brazil early on Sunday when a band's pyrotechnics show set the building ablaze and fleeing partygoers stampeded toward blocked and overcrowded exits in the ensuing panic, officials said.

The blaze in the university town of Santa Maria was started by a band member or someone from its production team igniting a flare, which then set fire to the ceiling, said Luiza Sousa, a civil police official. The fire spread "in seconds," she said.

Local fire officials said at least one exit was locked and that bouncers, who at first thought those fleeing were trying to skip out on bar tabs, initially blocked patrons from leaving. The security staff relented only when they saw flames engulfing the ceiling.

The tragedy, in a packed venue in one of Brazil's most prosperous states, comes as the country scrambles to improve safety, security and logistical shortfalls ahead of the 2014 World Cup soccer tournament and the 2016 Olympics, both intended to showcase the economic advances and first-world ambitions of Latin America's largest nation.

In Santa Maria, a city of more than 275,000 people, rescue workers and weary officials wept alongside family and friends of the victims at a local gymnasium being used as a makeshift morgue.

"It's the saddest, saddest day of my life," said Neusa Soares, the mother of one of those killed, 22-year-old Viviane Tolio Soares. "I never thought I would have to live to see my girl go away."

President Dilma Rousseff cut short an official visit to Chile and flew to Santa Maria, where she wept as she spoke to relatives of the victims at the gym.

"All I can say at the moment is that my feelings are of deep sorrow," said Rousseff, who began her political career in Rio Grande do Sul, the state where the fire occurred.

News of the fire broke on Sunday morning, when local news broadcast images of shocked people outside the Boate Kiss, as the nightclub was known. Gradually, grisly details emerged.

The vast majority of the victims, most of them university students, died of smoke inhalation, officials said. Others were crushed in the stampede.

"We ran into a barrier of the dead at the exit," Colonel Guido Pedroso de Melo, commander of the fire brigade in Rio Grande do Sul, said of the scene that firefighters found on arrival. "We had to clear a path to get to the rest of those that were inside."

Officials said more than 1,000 people may have been in the club, possibly exceeding its legal capacity. Though Internet postings about the venue suggested as many as 2,000 people at times have crammed into the club, Pedroso de Melo said no more than half that should have been inside.

He said the club was authorized to be open but its permit was in the process of being renewed.

However, Pedroso de Melo did point to several egregious safety violations - from the flare that went off during the show to the locked door that kept people from leaving.

'HAPPENED SO FAST'

When the fire began at about 2:30 a.m., many revelers were unable to find their way out amid the chaos, confusing restroom doors for exits and finding resistance from bouncers when they did find an exit.

"It all happened so fast," survivor Taynne Vendrusculo told GloboNews TV. "Both the panic and the fire spread rapidly, in seconds."

Once security guards realized the building was on fire, they tried in vain to control the blaze with a fire extinguisher, according to a televised interview with one of the guards, Rodrigo Moura. He said patrons were getting trampled as they rushed for the doors, describing it as "a horror film."

One of the club's owners has surrendered to police for questioning, GloboNews reported.

TV footage showed people sobbing outside the club before dawn, while shirtless firefighters used sledge hammers and axes to knock down an exterior wall to open up an exit.

Rescue officials moved the bodies to the local gym and separated them by gender. Male victims were easier to identify because most had identification on them, unlike the women, whose purses were left scattered in the devastated nightclub.

The disaster recalls other incidents including a 2003 fire at a nightclub in West Warwick, Rhode Island, that killed 100 people, and a Buenos Aires nightclub blaze in 2004 that killed nearly 200. In both incidents, a band or members of the audience ignited fires that set the establishment ablaze.

The Rhode Island fire shocked local and federal officials because of the rarity of such incidents in the United States, where enforcement of safety codes is considered to be relatively strict. After the Buenos Aires blaze, Argentine officials closed many nightclubs and other venues and ultimately forced the city's mayor from office because of poor oversight of municipal codes.

The fire early on Sunday occurred in one of the wealthiest, most industrious and culturally distinct regions of Brazil. Santa Maria is about 186 miles west of Porto Alegre, the capital of a state settled by Germans and other immigrants from northern Europe.

Local clichés paint the region as stricter and more squared away than the rest of Brazil, where most residents are a mix descended from native tribes, Portuguese colonists, African slaves, and later influxes of immigrants from southern Europe.

Rio Grande do Sul state's health secretary, Ciro Simoni, said emergency medical supplies from all over the state were being sent to the scene. States from all over Brazil offered support, and sympathy messages poured in from foreign leaders.

(Additional reporting by Guillermo Parra-Bernal, Gustavo Bonato, Jeferson Ribeiro, Eduardo Simões, Brian Winter and Guido Nejamkis.; Writing by Paulo Prada; Editing by Todd Benson, Kieran Murray and Eric Beech)

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Wall Street Week Ahead: Bears hibernate as stocks near record highs

NEW YORK (Reuters) - Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. The bearish case is a difficult one to make right now.

Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again.

The Standard & Poor's 500 Index <.spx> has gained 5.4 percent this year and closed above 1,500 - climbing to the spot where Wall Street strategists expected it to be by mid-year. The Dow Jones industrial average <.dji> is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895.98, its highest close since October 31, 2007.

The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. On Friday, the benchmark S&P 500 ended at 1,502.96 - its first close above 1,500 in more than five years.

"Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years."

The most recent Reuters poll of Wall Street strategists estimated the benchmark index would rise to 1,550 by year-end, a target that is 3.1 percent away from current levels. That would put the S&P 500 a stone's throw from the index's all-time intraday high of 1,576.09 reached on October 11, 2007.

The new year has brought a sharp increase in flows into U.S. equity mutual funds, and that has helped stocks rack up four straight weeks of gains, with strength in big- and small-caps alike.

That's not to say there aren't concerns. Economic growth has been steady, but not as strong as many had hoped. The household unemployment rate remains high at 7.8 percent. And more than 75 percent of the stocks in the S&P 500 are above their 26-week highs, suggesting the buying has come too far, too fast.

MUTUAL FUND INVESTORS COME BACK

All 10 S&P 500 industry sectors are higher in 2013, in part because of new money flowing into equity funds. Investors in U.S.-based funds committed $3.66 billion to stock mutual funds in the latest week, the third straight week of big gains for the funds, data from Thomson Reuters' Lipper service showed on Thursday.

Energy shares <.5sp10> lead the way with a gain of 6.6 percent, followed by industrials <.5sp20>, up 6.3 percent. Telecom <.5sp50>, a defensive play that underperforms in periods of growth, is the weakest sector - up 0.1 percent for the year.

More than 350 stocks hit new highs on Friday alone on the New York Stock Exchange. The Dow Jones Transportation Average <.djt> recently climbed to an all-time high, with stocks in this sector and other economic bellwethers posting strong gains almost daily.

"If you peel back the onion a little bit, you start to look at companies like Precision Castparts , Honeywell , 3M Co and Illinois Tool Works - these are big, broad-based industrial companies in the U.S. and they are all hitting new highs, and doing very well. That is the real story," said Mike Binger, portfolio manager at Gradient Investments, in Shoreview, Minnesota.

The gains have run across asset sizes as well. The S&P small-cap index <.spcy> has jumped 6.7 percent and the S&P mid-cap index <.mid> has shot up 7.5 percent so far this year.

Exchange-traded funds have seen year-to-date inflows of $15.6 billion, with fairly even flows across the small-, mid- and large-cap categories, according to Nicholas Colas, chief market strategist at the ConvergEx Group, in New York.

"Investors aren't really differentiating among asset sizes. They just want broad equity exposure," Colas said.

The market has shown resilience to weak news. On Thursday, the S&P 500 held steady despite a 12 percent slide in shares of Apple after the iPhone and iPad maker's results. The tech giant is heavily weighted in both the S&P 500 and Nasdaq 100 <.ndx> and in the past, its drop has suffocated stocks' broader gains.

JOBS DATA MAY TEST THE RALLY

In the last few days, the ratio of stocks hitting new highs versus those hitting new lows on a daily basis has started to diminish - a potential sign that the rally is narrowing to fewer names - and could be running out of gas.

Investors have also cited sentiment surveys that indicate high levels of bullishness among newsletter writers, a contrarian indicator, and momentum indicators are starting to also suggest the rally has perhaps come too far.

The market's resilience could be tested next week with Friday's release of the January non-farm payrolls report. About 155,000 jobs are seen being added in the month and the unemployment rate is expected to hold steady at 7.8 percent.

"Staying over 1,500 sends up a flag of profit taking," said Jerry Harris, president of asset management at Sterne Agee, in Birmingham, Alabama. "Since recent jobless claims have made us optimistic on payrolls, if that doesn't come through, it will be a real risk to the rally."

A number of marquee names will report earnings next week, including bellwether companies such as Caterpillar Inc , Amazon.com Inc , Ford Motor Co and Pfizer Inc .

On a historic basis, valuations remain relatively low - the S&P 500's current price-to-earnings ratio sits at 15.66, which is just a tad above the historic level of 15.

Worries about the U.S. stock market's recent strength do not mean the market is in a bubble. Investors clearly don't feel that way at the moment.

"We're seeing more interest in equities overall, and a lot of flows from bonds into stocks," said Paul Zemsky, who helps oversee $445 billion as the New York-based head of asset allocation at ING Investment Management. "We've been increasing our exposure to risky assets."

For the week, the Dow climbed 1.8 percent, the S&P 500 rose 1.1 percent and the Nasdaq advanced 0.5 percent.

(Reporting by Ryan Vlastelica; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Canada’s Flaherty less optimistic on Keystone prospects

DAVOS, Switzerland (Reuters) – U.S. President Barack Obama‘s emphasis in his inaugural address on fighting climate change may not bode well for the contentious project to build the Keystone XL oil pipeline, Canada’s finance minister said on Friday.

The Canadian government has been an enthusiastic supporter of TransCanada Corp‘s plan to build the $ 5.3 billion pipeline, which would open up a huge new market on the U.S. Gulf Coast for crude derived from oil sands in Alberta.

Washington faces a decision in the next few months on whether to approve the project, a possible cure for deeply discounted Canadian crude prices.

“I had reason for optimism before the election that the president would approve it, were he re-elected, but his speech the other day was not encouraging,” Finance Minister Jim Flaherty told Reuters at the World Economic Forum in Davos.

Obama promised in his address on Monday to combat climate change, citing recent fires, drought and storms, “knowing that the failure to do so would betray our children and future generations”. The United States had to be a leader in sustainable energy, Obama said, putting the issue as a matter of national security and economic opportunity.

Environmental groups oppose Keystone XL, saying it would encourage more carbon-intensive tar sands development.

Surging output and tight export pipeline capacity has pulled the price of Canadian heavy crude in recent months to less than half the value of international benchmark Brent crude. This is hurting the public finances in Alberta, which warned this week of a C$ 6 billion ($ 6 billion) shortfall in revenue for its 2013-14 fiscal year as a result.

The Canadian economy, which depends heavily on energy and commodity prices, is also suffering, according to the central bank.

Flaherty pointed out that the energy industry was putting together alternative plans to move Alberta crude to new markets.

Some include Enbridge Inc’s C$ 6 billion Northern gateway pipeline to the Pacific Coast, proposals to ship the oil to Quebec and further east, and even a scheme to build a railroad to Alaska, where the crude could be shipped to the oil port at Valdez.

“We will go wherever we have to go. We are going to create markets for Canadian commodities,” Flaherty said. Asked how fast such plans could be put in motion, he said: “We’ll do it quickly. We have major projects right now on our agenda and we will encourage them.”

TransCanada first applied to build Keystone XL in 2008. Obama rejected it last year, saying it needed a new route around the environmentally sensitive Sandhills region of Nebraska.

This week, Nebraska’s governor approved the reworked path that skirts the area, and 53 U.S. senators wrote to Obama urging him to approve the project, citing energy security and jobs benefits. The state department, which is handling the issue because the pipeline would cross the Canadian border, said it will not make a ruling until at least the end of March.

(Reporting by Ben Hirschler; Writing by Jeffrey Jones; editing by David Stamp)

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Stan Musial remembered during funeral Mass

ST. LOUIS (AP) — Stan Musial was remembered as a Hall of Famer on and off the field during a 2-hour funeral Mass.

Broadcaster Bob Costas, his voice cracking at times, pointed out during Saturday's lengthy tribute that in 92 years of life, Musial never let anyone down.

Among those in attendance were baseball Commissioner Bud Selig, former St. Louis standout Albert Pujols and Hall of Famers Bob Gibson, Lou Brock, Bruce Sutter and Red Schoendienst.

The 90-year-old Schoendienst once roomed with Musial.

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