Firm bringing HQ to Chicago

St. Louis-based construction firm Clayco Inc. is moving its headquarters to Chicago, attracted by ease of air travel, proximity to clients, access to young professionals and the potential to land city business as Mayor Rahm Emanuel pushes ahead with public-private partnerships for infrastructure improvements, its top executive said Thursday.

Clayco Chairman and CEO Robert Clark and Emanuel are expected to formally announce the move Friday.

Two-hundred and eighty of the company's 1,000 employees already work in the Chicago area, including 88 who work full time at the Jewelers Building, 35 E. Wacker Drive, which becomes company headquarters.

The company expects to double its Chicago workforce during the next couple of years, in part by increasing its architectural business and expanding its infrastructure business.

Clark said the company is seeking to acquire a municipal engineering company as part of an effort to develop its infrastructure business during the next few years. Now focused on industrial, office and institutional projects, the company would like to add a fourth specialty area that would go after water, sewer, road, bridge and airport work, Clark said.

"In the long run, public-private partnerships are something I'm very intrigued about and interested in pursuing," he said. "I don't think we'll do it overnight. … It may be three years from now, until we have significant traction in the (infrastructure) market."

"We're interested in national projects, not just local," he said. "But hopefully we'll have work in our own backyard."

Clayco donated $50,000 to Emanuel's mayoral campaign in late 2010, and Clark donated an additional $10,000 in September to The Chicago Committee, the mayor's campaign fund, according to the Illinois State Board of Elections. Clark said his contributions to a variety of politicians stem from personal convictions and have no relation to his business endeavors.

Tom Alexander, a spokesman for Emanuel, said: "Clayco is choosing Chicago because Chicago offers them unique access to world-class talent and a location from which they can easily and effectively do business around the world, period. Any type of private-public building project would undergo the city's very strict, competitive procurement process."

Last spring, Emanuel won City Council approval for the formation of the Chicago Infrastructure Trust, which will endeavor to secure private financing for public infrastructure projects.

Clayco's shift into downtown Chicago began in October 2010, when it opened offices in the Jewelers Building. Employees who had been based in Oakbrook Terrace have moved there, as have a handful of executives from St. Louis. Clark relocated to Chicago in September 2010.

The company did not seek or receive any financial incentives for its move, the city said. Clayco will keep its St. Louis office intact, and no layoffs are planned as part of the relocation.

Clark and Emanuel first met when Emanuel worked in the Clinton White House. Clark, who was active with the Young Presidents' Organization, worked with Emanuel on some events at the White House. Their paths have crossed a number of times since then, including during President Barack Obama's campaign in 2008.

A meeting with Emanuel played a role in the decision to relocate company headquarters, Clark said. It occupies the 13th and 27th floors of the Jewelers Building, or 30,000 square feet.

"He asked me to target our national clients and bring them here," Clark recalls. "Quite frankly, I was blown away by that. Most mayors are not that aggressive; they leave that up to their economic development folks."

Clayco has done work for a number of large institutions and corporations, including Dow Chemical, Amazon.com, Caterpillar, and locally, Kraft Foods, Anixter, the University of Illinois, the University of Chicago and Blue Cross Blue Shield.

Started 28 years ago by Clark, the privately held company has annual revenue of $820 million. Subsidiaries include architecture and design firm Forum Studios and Concrete Strategies Inc.

kbergen@tribune.com

Twitter @kathy_bergen

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Lebanon asks for $180 million to aid Syrian refugees

BEIRUT (Reuters) - Lebanon, now a haven for 170,000 Syrians fleeing civil war, has asked foreign donors for $180 million to help care for them and said it will register and recognize refugees after a year-long hiatus.

The Beirut government has officially sought to "dissociate" itself from the 21-month-old struggle in Syria, nervous about the destabilizing impact of the increasingly sectarian conflict in its bigger neighbor on its own delicate communal balance.

But there has been pressure from humanitarian agencies and the public to do more to help Syrian refugees in Lebanon.

The cabinet, which approved the measures after a six-hour session on Thursday night, rejected a proposal by Energy Minister Gebran Bassil, a Christian, to close the border to stop the influx into Lebanon, where mainly Sunni Muslim Syrian refugees now account for almost 5 percent of the population.

Bassil belongs to the Free Patriotic Movement, part of a political alliance with Shi'ite Muslim militant group Hezbollah, which supports Syrian President Bashar al-Assad.

However, Hezbollah leader Hassan Nasrallah said in a speech on Thursday that the border should stay open for refugees.

Social Affairs Minister Wael Abu Faour told reporters after the cabinet debate: "The Lebanese state will register the refugees...and guarantee aid and protection for the actual refugees in Lebanon."

Until now Syrian refugees have found shelter with local communities in Lebanon, rather than being housed in camps, as in the other two main host countries, Jordan and Turkey. Abu Faour did not say if camps would now be constructed.

"FIRST CONCRETE PLAN"

Lebanon's ambivalent attitude to the new arrivals is partly a legacy of its own 15-year civil war, a conflict fuelled by sectarian tensions which linger on, especially over the presence of 400,000 Sunni Palestinian refugees in the country.

Ninette Kelley, representative of the U.N. refugee agency (UNHCR) in Lebanon, said the government's action was "the first concrete plan" it had presented to the international community.

She said Lebanon had previously given formal recognition to Syrian refugees who entered via official border points, but not to those who had crossed illegally, either because they feared authorities or to escape violence near their homes.

This group accounts for around 30 percent of all Syrian refugees in Lebanon and the government's decision should allow them to register for legal refugee status, Kelley said.

"Initially the government jointly registered Syrian refugees with UNHCR through its High Relief Commission. It stopped in 2011 as the numbers became larger due to insufficient capacity," she said, adding that joint registration would now resume.

The United Nations says more than 560,000 Syrians have fled abroad. In Lebanon, many not hosted by friends or relations live in shacks of wood and plastic sheeting. In the southern city of Tyre, they brave the winter cold and wash in the sea.

Lebanese politics is marred by sectarian divisions that have been inflamed by the mainly Sunni revolt against Assad, whose minority Alawite sect is derived from Shi'ite Islam.

Syria-related violence has flared periodically in the northern port of Tripoli, which has a Sunni majority and an Alawite minority, as well as in Beirut and Sidon in the south.

Assad's Lebanese opponents blame Syria, which stationed troops in Lebanon from 1976 to 2005, for the unresolved killing of Lebanese security official Wissam al-Hassan in October.

Hassan had been leading an investigation that implicated Damascus and Hezbollah in the 2005 assassination of former Lebanese prime minister Rafik al-Hariri, a Sunni.

(Reporting by Issam Abdallah, Oliver Holmes and Ayat Basma; Editing by Alistair Lyon)

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Wall Street set for post-rally drop as profits booked

NEW YORK (Reuters) - Wall Street was set for a slightly lower open on Thursday, as investors lock in gains after a rally Wednesday, which was spurred by a deal by U.S. lawmakers to avert a "fiscal cliff" of austerity measures that had been due to kick in this year.

Earlier losses in U.S. stock index futures Thursday were capped by better-than-expected data that showed U.S. private-sector employers added 215,000 jobs in December. That was well above economists' expectations for a gain of 133,000 jobs, according to a Reuters survey.

"The underlying economy has momentum, and the employment data confirms that. The political issues in Washington counter the momentum we're seeing in the economy, but you might see still equities grind higher today on this," said John Brady, managing director at R.J. O'Brien & Associates in Chicago.

A separate report showed the number of Americans filing new claims for unemployment benefits rose last week, but the data was too distorted by year-end holidays to offer a clear read of labor market conditions.

S&P 500 futures fell 2.3 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 20 points, while Nasdaq 100 futures dipped 1.00 point.

Wall Street began the new year Wednesday with a rally and their best performance in more than a year, sparked by a last-minute deal in Washington to avert a fiscal cliff of automatic massive tax hikes and spending cuts that, in the worst-case scenario, would have hurt the nation's economic growth.

The minutes of the Federal Reserve's policy meeting last month will be released at 2:00 p.m. EST. The minutes will give details on the discussions of the Federal Open Market Committee's December 11-12 meeting.

U.S. retailer Costco Wholesale Corp reported a better-than-expected 9 percent rise in December sales at stores open at least a year, mainly helped by an additional sales day in the reporting period. Costco shares were flat in premarket trading.

Gap Inc will buy women's fashion boutique Intermix Inc for $130 million to enter the luxury clothes market, the Wall Street Journal reported. The stock surged 4.9 percent to $32.90 in premarket trading.

Family Dollar Stores Inc reported a lower-than-expected quarterly profit as its emphasis on selling more everyday items like cigarettes and soft drinks put pressure on margins. The stock fell 8 percent to $58.89 in premarket trading.

Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world's second-largest economy.

(Editing by Bernadette Baum)

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Louisville upsets Florida 33-23 in Sugar Bowl

NEW ORLEANS (AP) — Terell Floyd and the Louisville Cardinals gave the embattled Big East Conference at least one more triumphant night in a major bowl — and at the expense of a top team from the mighty SEC.

Floyd returned an interception 38 yards for a touchdown on the first play, dual-threat quarterback Teddy Bridgewater directed a handful of scoring drives and No. 22 Louisville stunned the fourth-ranked Gators 33-23 in the Sugar Bowl on Wednesday night.

"I can't speak for the whole Big East, but I can speak for Louisville and I think this means a lot for us," Floyd said. "We showed the world we can play with the best."

The Big East is in a transitional phase and losing some of its top football programs in the process. Boise State has recently backed out of its Big East commitment and Louisville has plans to join the ACC.

Even this year, the Big East wasn't getting much respect. Louisville, the league champion, was a two-touchdown underdog in the Sugar Bowl.

But by the end, the chant, "Charlie, Charlie!" echoed from sections of the Superdome occupied by red-clad Cardinals fans. It was their way of serenading third-year Louisville coach Charlie Strong, the former defensive coordinator for the Gators, who has elevated Cardinals football to new heights and recently turned down a chance to leave for the top job at Tennessee.

"I look at this performance tonight, and I sometimes wonder, 'Why didn't we do this the whole season,'" Strong said. "We said this at the beginning: We just take care of our job and do what we're supposed to do, don't worry about who we're playing."

Shaking off an early hit that flattened him and knocked off his helmet, Bridgewater was 20 of 32 passing for 266 yards and two touchdowns. Among his throws was a pinpoint, 15-yard timing toss that DeVante Parker grabbed as he touched one foot down in the corner of the end zone.

"I looked at what did and didn't work for quarterbacks during the regular season," said Bridgewater, picked as the game's top player. "They faced guys forcing throws ... and coach tells me, 'No capes on your back or 'S' on your chest, take what the defense give you.' That's what I took. Film study was vital."

His other scoring strike went to Damian Copeland from 19 yards one play after a surprise onside kick by the Gators backfired. Jeremy Wright had a short touchdown run that gave Louisville (11-2) a 14-0 lead the Gators couldn't overcome.

Florida (11-2) never trailed by more than 10 points this season. The defeat dropped SEC teams to 3-3 this bowl season, with Alabama, Texas A&M and Mississippi still to play.

"We got outcoached and outplayed," Florida coach Will Muschamp said. "That's what I told the football team. That's the bottom line."

Gators quarterback Jeff Driskel, who had thrown only three interceptions all season, turned the ball over three times on two interceptions — both tipped passes — and a fumble. He finished 16 of 29 for 175 yards.

Down 33-10 midway through the fourth period, Florida tried to rally. Andre Debose scored on a 100-yard kickoff return and Driskel threw a TD pass to tight end Kent Taylor with 2:13 left. But when Louisville defenders piled on Driskel to thwart the 2-point try, the game was essentially over.

Florida didn't score until Caleb Sturgis's 33-yard field goal early in the second quarter.

The Gators finally got in the end zone with a trick play in the closing seconds of the half. They changed personnel as if to kick a field goal on fourth-and-goal from the 1, but lined up in a bizarre combination of swinging-gate and shotgun formations and handed off to Matt Jones.

The Gators tried to keep the momentum with a surprise onside kick to open the third quarter, but not only did Louisville recover, Florida's Chris Johnson was called for a personal foul and ejected for jabbing at Louisville's Zed Evans. That gave Louisville the ball on the Florida 19, from where Bridgewater needed one play to find Copeland for his score.

"We game-planned it and felt good about it," Muschamp said of the onside kick attempt. "We wanted to steal a possession at the start of the second half."

On the following kickoff, Evans cut down kick returner Loucheiz Purifoy with a vicious low, high-speed hit that shook Purifoy up. Soon after, Driskel was sacked hard from behind and stripped by safety Calvin Pryor, ending another Florida drive with a turnover.

"We had the right attitude, had the right mindset that we would go out and beat this team," Pryor said.

After Louisville native Muhammad Ali was on the field for the coin toss, the Cardinals quickly stung the Gators. Floyd, one of nearly three dozen Louisville players from Florida, made the play.

Driskel was looking for seldom-targeted Debose, who'd had only two catches all season.

"I threw it behind him, (he) tried to make a play on it, tipped it right to the guy," Driskel said. "Unfortunate to start the game like that."

When Louisville's offense got the ball later in the quarter, the Florida defense, ranked among the best in the nation this season, sought to intimidate the Cardinals with one heavy hit after another.

One blow by Jon Bostic knocked Bridgewater's helmet off moments after he'd floated an incomplete pass down the right sideline. Bostic was called for a personal foul, however, which seemed to get the Cardinals opening drive rolling. Later, Wright lost his helmet during a 3-yard gain and took another heavy hit before he went down.

Louisville kept coming.

B.J. Butler turned a short catch into a 23-yard gain down to the Florida 1. Then Wright punched it in to give the Cardinals an early two-TD lead over a team that finished third in the BCS standings, one spot too low to play for a national title in Miami.

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AAA Mich.: Gas prices up 7 cents from last week

DEARBORN, Mich. (AP) — AAA Michigan says gasoline prices have risen roughly 7 cents during the past week to a statewide average of about $ 3.30 per gallon.

The auto club said Wednesday the average is about 12 cents per gallon less than last year at this time.

Of the Michigan cities it surveys, AAA Michigan said the cheapest price for self-serve unleaded fuel is in the Saginaw and Bay City areas, where it’s about $ 3.21 a gallon. The highest average is in the Benton Harbor area at about $ 3.36.

Dearborn-based AAA Michigan surveys 2,800 Michigan gas stations daily.

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Why U.S. lives under the shadow of 'W'

Julian Zelizer says former President George W. Bush's key tax and homeland security policies survive in the age of Obama

STORY HIGHLIGHTS

• Julian Zelizer: For all the criticism Bush got, two key policies have survived


• He says fiscal cliff pact perpetuates nearly all of Bush's tax cuts


• Obama administration has largely followed Bush's homeland security policy, he says


• Zelizer: By squeezing revenues, Bush tax cuts will put pressure on spending

Editor's note: Julian Zelizer is a professor of history and public affairs at Princeton University. He is the author of "Jimmy Carter" and of "Governing America."

Princeton, New Jersey (CNN) -- Somewhere in Texas, former President George W. Bush is smiling.

Although some Democrats are pleased that taxes will now go up on the wealthiest Americans, the recent deal to avert the fiscal cliff entrenches, rather than dismantles, one of Bush's signature legacies -- income tax cuts. Ninety-nine percent of American households were protected from tax increases, aside from the expiration of the reduced rate for the payroll tax.

Julian Zelizer

In the final deal, Congress and President Barack Obama agreed to preserve most of the Bush tax cuts, including exemptions on the estate tax.

When Bush started his term in 2001, many of his critics dismissed him as a lightweight, the son of a former president who won office as result of his family's political fortune and a controversial decision by the Supreme Court on the 2000 election.

But what has become clear in hindsight, regardless of what one thinks of Bush and his politics, is that his administration left behind a record that has had a huge impact on American politics, a record that will not easily be dismantled by future presidents.

The twin pillars of Bush's record were counterterrorism policies and tax cuts. During his first term, it became clear that Obama would not dismantle most of the homeland security apparatus put into place by his predecessor. Despite a campaign in 2008 that focused on flaws with the nation's response to 9/11, Obama has kept most of the counterterrorism program intact.

In some cases, the administration continues to aggressively use tactics his supporters once decried, such as relying on renditions to detain terrorist suspects who are overseas, as The Washington Post reported this week. In other areas, the administration has expanded the war on terrorism, including the broader use of drone strikes to kill terrorists.

Now come taxes and spending.

With regard to the Bush tax cuts, Obama had promised to overturn a policy that he saw as regressive. Although he always said that he would protect the middle class from tax increases, Obama criticized Bush for pushing through Congress policies that bled the federal government of needed revenue and benefited the wealthy.

In 2010, Obama agreed to temporarily extend all the tax cuts. Though many Democrats were furious, Obama concluded that he had little political chance to overturn them and he seemed to agree with Republicans that reversing them would hurt an economy limping along after a terrible recession.

With the fiscal cliff deal, Obama could certainly claim more victories than in 2010. Taxes for the wealthiest Americans will go up. Congress also agreed to extend unemployment compensation and continue higher payments to Medicare providers.

But beneath all the sound and fury is the fact that the 2001 and 2003 tax cuts, for most Americans, are now a permanent part of the legislative landscape. (In addition, middle class Americans will breathe a sigh of relief that Congress has permanently fixed the Alternative Minimum Tax, which would have hit many of them with a provision once designed to make sure that the wealthy paid their fair share.)

As Michigan Republican Rep. Dave Camp remarked, "After more than a decade of criticizing these tax cuts, Democrats are finally joining Republicans in making them permanent." Indeed, the Congressional Budget Office estimates that the new legislation will increase the deficit by $4 trillion over the next 10 years.

The tax cuts have significant consequences on all of American policy.

Most important, the fact that a Democratic president has now legitimated the moves of a Republican administration gives a bipartisan imprimatur to the legitimacy of the current tax rates.

Although some Republicans signed on to raising taxes for the first time in two decades, the fact is that Democrats have agreed to tax rates which, compared to much of the 20th century, are extraordinarily low. Public perception of a new status quo makes it harder for presidents to ever raise taxes on most Americans to satisfy the revenue needs for the federal government.

At the same time, the continuation of reduced taxes keeps the federal government in a fiscal straitjacket. As a result, politicians are left to focus on finding the money to pay for existing programs or making cuts wherever possible.

New innovations in federal policy that require substantial revenue are just about impossible. To be sure, there have been significant exceptions, such as the Affordable Care Act. But overall, bold policy departures that require significant amounts of general revenue are harder to come by than in the 1930s or 1960s.

Republicans thus succeed with what some have called the "starve the beast" strategy of cutting government by taking away its resources. Since the long-term deficit only becomes worse, Republicans will continue to have ample opportunity to pressure Democrats into accepting spending cuts and keep them on the defense with regards to new government programs.

With his income tax cuts enshrined, Bush can rest comfortably that much of the policy world he designed will remain intact and continue to define American politics. Obama has struggled to work within the world that Bush created, and with this legislation, even with his victories, he has demonstrated that the possibilities for change have been much more limited than he imagined when he ran in 2008 or even in 2012.

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The opinions expressed in this commentary are solely those of Julian Zelizer.

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Sandy Hook kids return to class in neighboring town

MONROE, Conn. — The Newtown schools superintendent says preparations have been made for a "normal" day, yet it will likely be anything but that when classes resume for Sandy Hook Elementary School students for the first time since a gunman killed 20 of their classmates.

With their original school still being treated as a crime scene, the students will begin attending classes at a refurbished school in the neighboring town of Monroe on Thursday. Law enforcement officers have been guarding the new school, and by the reckoning of police, it is "the safest school in America."

Still, Newtown Superintendent Janet Robinson said officials will do their best to make the students feel at ease.

"We will go to our regular schedule," she said. "We will be doing a normal day."

On Wednesday, the students and their families were welcomed at an open house at their new school, which was formerly the Chalk Hill Middle School in Monroe but renamed as the Sandy Hook Elementary School. Students received gift boxes with toys inside and shared joyful reunions with teachers.

One father, Vinny Alvarez, took a moment to thank his third-grade daughter's teacher, Courtney Martin, who protected the class from a rampaging gunman by locking her classroom door and keeping the children in a corner.

"Everybody there thanked her in their own way," he said.

Parents wishing to remain with their kids, ages 5 to 10 in kindergarten through grade 4, will be allowed to accompany them to their classrooms and afterwards may stay in the school's "lecture room" for as long as they like, according to a memo to parents on the school's website. Counseling will be available for students and parents at the new school, about 7 miles south of the scene of the shooting.

The gunman, Adam Lanza, also killed his mother at the home they shared in Newtown before driving to the school, where he slaughtered 20 children and six educators, including the school's principal. Lanza fatally shot himself as police arrived. Police haven't released any details about a motive.

Numerous police officers on Wednesday guarded the outside of the Monroe school, which is about 7 miles from the old school, and told reporters to stay away.

"I think right now it has to be the safest school in America," Monroe police Lt. Keith White said.

Teachers attended staff meetings at the new school on Wednesday morning and were visited by Gov. Dannel P. Malloy before the open house, White said.

Robinson said Chalk Hill School has been transformed into a "cheerful" place for the surviving students to resume normal school routines. She said mental health counselors continue to be available for anyone who needs them.

During the open house, Alvarez said his 8-year-old daughter also got to pick out a stuffed animal to take home from the school library.

"I'm not worried about her going back," he said of his daughter Cynthia. "The fear kind of kicks back in a little bit, but we're very excited for her and we got to see many, many kids today. The atmosphere was very cheerful."

Several signs welcoming the Sandy Hook students to their new school were posted along the road leading to the school in a rural, mostly residential neighborhood. One said "Welcome Sandy Hook Elementary Kids," while a similar sign added "You are in our prayers."

Teams of workers, many of them volunteers, prepared the Chalk Hill school with fresh paint and new furniture and even raised bathroom floors so the smaller elementary school students can reach the toilets. The students' desks, backpacks and other belongings that were left behind following the shooting were taken to the new school to make them feel at home.

No new details released

In the meantime, no new details have emerged to explain why the 20-year-old Lanza, armed with a semi-automatic assault rifle, two other firearms and hundreds of rounds of ammunition, targeted the school.

Described by family friends as having Asperger's syndrome, a form of autism, Lanza shot and killed his mother, Nancy Lanza, at their home about 5 miles from the school before driving to Sandy Hook and embarking on the massacre, police said. He then took his own life as police were arriving at the school, which had an enrollment of 456.

Police have offered no firm motive for the attack, and state police investigators have said it could be months before they finish their report.

The massacre in Newtown, a rural New England town of 27,000 residents about 70 miles northeast of New York City, stunned the nation, prompting President Barack Obama to call it the worst day of his presidency and reigniting an extensive debate on gun control. Obama has tasked Vice President Joe Biden with assembling a package of gun-control proposals to submit to Congress in the next several weeks.

The National Rifle Association, the most powerful gun-rights lobby in the United States, has rebuffed calls for more stringent firearms restrictions and instead called for armed guards to patrol every public school in the country.

Associated Press and Reuters contributed

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Myanmar says jets used against Kachin rebels

YANGON (Reuters) - Myanmar's military has used jets to attacks rebel fighters in northern Kachin state, the government said on Thursday, its first admission of an intensification of a conflict that has raised doubts about its reformist credentials.

Rebel sources have reported aerial bombings, shelling and even the use of chemical weapons since December 28 after the Kachin Independence Army (KIA) ignored an ultimatum to stop blocking an army supply route in the hilly, resource-rich state where more than 50,000 people have been displaced.

Official newspapers said that air support was used on December 30 to thwart KIA fighters who had occupied a hill and were attacking logistics units of the Tatmadaw, as Myanmar's military is known.

"The Tatmadaw troops cleared Point-771 hill and its surrounding areas where the KIA troops were attacking the Tatmadaw logistic troops," the New Light of Myanmar, a government mouthpiece, said. "The air cover was used in the attack."

U.N. Secretary-General Ban Ki-moon voiced concern on Wednesday over reports of helicopters and fighter jets being used in the state bordering China. The KIA said the attacks were intended to clear the path for an assault on its headquarters in Laisa.

Ban called on Myanmar's government to "desist from any action that could endanger the lives of civilians" and reiterated demands for humanitarian aid groups to be granted access, U.N. spokesman Martin Nesirky said in a statement.

President Thein Sein's quasi-civilian administration insists it wants a ceasefire and political dialogue. It says troops have acted only in self-defense and on Thursday denied having plans to seize the KIA's stronghold.

DOMINANT MILITARY

The escalation of fighting has raised doubts about the sincerity of the reformist ex-generals running the government and the extent of their power in a country the size of Britain and France plagued by decades of internal conflict.

Some analysts and diplomats say central government is either not fully committed to peace with the KIA or unable to assert control over the military, which still dominates politics and the economy despite formally ceding power in March 2011.

Colonel James Lum Dau, a Thai-based spokesman for the KIA's political wing, said Kachin officials on the ground had reported up to 300 people killed in air strikes.

"We are in a defensive position. Right now more people are suffering not only bombings, but shelling and spraying of chemical weapons with helicopter gunships and jets," he said. "Only god knows what to do. We are praying."

It is difficult for journalists to independently verify accounts from the two sides.

Fighting erupted in Kachin in June 2010, ending a 17-year truce, and has continued even as government negotiators have agreed ceasefires elsewhere with ethnic Shan, Chin, Mon and Karen militias after decades of fighting in border areas.

Mistrust runs deep between the military and the KIA, which was once backed by China, and multiple rounds of talks aimed at reaching a ceasefire have gone nowhere. Analysts say a history of bad blood and a battle for control of resources, including highly lucrative jade, could be stoking the unrest.

Zaw Htay, a senior official in Thein Sein's office, told Reuters no air strikes had taken place but K-8 trainer jets had provided cover fire to protect ground troops from rebel attacks. The military, he said, had no intention of seizing the KIA's headquarters.

"The president has said this and at the same time he has invited KIA leaders to come and talk with him in Naypyitaw, but they still haven't responded," Zaw Htay said.

(Additional reporting by Paul Carsten in Bangkok; Writing by Martin Petty; Editing by Alan Raybould)

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Wall Street set for rally in wake of fiscal pact

NEW YORK (Reuters) - Wall Street was set to rally on the first trading day of 2013, after lawmakers agreed a deal to avoid massive tax hikes and spending cuts that had threatened to hurt economic growth.

The gains would come after stocks ended 2012 with their strongest day in more than a month, which put the S&P 500 up 13.4 percent for the year, after a flat performance in 2011.

Late on Tuesday, the House of Representatives voted for a bill that will raise taxes on wealthy individuals and families and preserve certain benefits.

The vote averted immediate austerity measures, like tax hikes for almost all U.S. households, although it didn't resolve other political showdowns on the budget due in coming months. Spending cuts of $109 billion in military and domestic programs were only delayed for two months.

"We are looking at a sharply higher open on Wall Street," said Peter Cardillo, chief market analyst for Rockwell Global Capital in New York. "The deal certainly brightens the prospects for economic growth, and traditionally speaking, the first week of the year generally sets the stage for the rest of the year for equities - so this is positive."

"There is a lot of euphoria out there and I expect, for the next day or two, the market will continue on the upside. We will see money re-entering the market," Cardillo said.

S&P 500 futures rose 26.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 203 points, and Nasdaq 100 futures added 57.25 points.

The long-awaited U.S. fiscal deal lifted global shares at the start of the new year. The pan-European FTSEurofirst 300 <.fteu3> was up 1.6 percent and the MSCI world index <.miwd00000pus> rose 0.8 percent. The MSCI Asia Pacific ex-Japan index of stocks <.miapj0000pus> surged 2.1 percent. Japanese markets were closed Wednesday for a holiday.

On the macroeconomic front, the Institute for Supply Management's manufacturing sector survey will be released at 10:00 a.m. ET (1500 GMT). A Reuters survey forecasts the main index at 50.3 compared with 49.5 in November.

Also at 10:00 a.m., November construction spending data will be released. A Reuters survey forecasts a 0.6 percent rise in construction spending, versus 1.4 percent in the prior month.

On the last day of trading in 2012, the Dow Jones industrial average <.dji> gained 166.03 points, or 1.28 percent, to close at 13,104.14. The Standard & Poor's 500 Index <.spx> gained 23.76 points, or 1.69 percent, to finish at 1,426.19. The Nasdaq Composite Index <.ixic> gained 59.20 points, or 2.00 percent, to close at 3,019.51.

In 2012, the Dow advanced 7.3 percent, while the Nasdaq climbed 15.9 percent.

(Editing by Bernadette Baum)

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Stanford holds off Wisconsin 20-14 in Rose Bowl

PASADENA, Calif. (AP) — Andrew Luck, Toby Gerhart and coach Jim Harbaugh started Stanford's improbable football renaissance, yet they never stood in the center of the Rose Bowl with the West Coast's most coveted trophy raised above their heads.

In fact, the last Stanford team to do what the Cardinal did Tuesday night had a defense known as the Thunderchickens.

Forty years after Stanford's last Rose Bowl victory, the favored Cardinal lived up to the legacy created by Luck, Harbaugh and every Thunderchicken that came before them by winning the bowl game that matters most to any Pac-12 team.

Stepfan Taylor rushed for an early touchdown, Kevin Hogan passed for 123 yards and No. 8 Stanford's defense shut out the Badgers in the second half of a 20-14 victory in the 99th Rose Bowl.

"I had heard that 1972 was our last win," said Hogan, the freshman quarterback who won Stanford's last five games. "It's been too long since we've had one at The Farm. It's a great feeling."

Instead of slipping back off the college football map when their biggest names graduate to NFL glory, the Cardinal (12-2) have just kept getting better under coach David Shaw. After winning the Orange Bowl two years ago and losing the Fiesta Bowl in overtime last season, Stanford followed up with its first conference title and its first trip to the Granddaddy of Them All in 13 years.

Stanford's unique combination of brains and brawn was too much for its opponents during eight straight wins to close the season.

"We've been in BCS games the past two years, but neither of those mean as much as this one did," said Zach Ertz, the tight end who had three catches for 61 yards. "This is the one we play for every year. It shows Stanford is here to stay."

Usua Amanam capped the defensive performance with an interception that stopped Wisconsin's final drive at midfield with 2:30 to play in a grind-it-out game. Stanford allowed the Badgers just 82 yards and four first downs after halftime.

"There's a sense of accomplishment, because we got somewhere we hadn't been yet," said linebacker Shayne Skov, who made eight tackles while leading Stanford's second-half shutout. "If you looked at our goals at the beginning of the season, this was on top of the list, and we got it done. We're extremely satisfied."

The Cardinal finished with 12 victories for just the second time in school history — and the second time in the last three years.

Stanford clamped down on the Big Ten champion Badgers (8-6), who lost the Rose Bowl in heartbreaking fashion for the third consecutive season. Montee Ball rushed for 100 yards and his FBS-record 83rd touchdown, but Wisconsin couldn't score after the final seconds of the first half.

With an impressive defense of its own, Wisconsin stayed in position for an upset in the one-game return of Hall of Fame coach Barry Alvarez, who was back on the Badgers' sideline in his red sweater-vest seven years after hanging up his whistle.

"This group of kids has been through a lot, and they competed extremely hard against a very high-quality team," said Alvarez, who nearly pulled off a stunner while bridging the gap between coaches Bret Bielema and Gary Andersen. "We've played three very good football games (at the Rose Bowl). These guys played hard. In fact, most people would like to get here once. But we just didn't get it done."

Kelsey Young took his only carry 16 yards for a score on Stanford's opening possession, and Taylor scored on the second drive after a big catch by Ertz. Wisconsin kept the Cardinal out of the end zone for the final 51 minutes, holding them to three points in the second half, but Stanford's defense didn't need any more help.

When Bielema abruptly left Wisconsin for Arkansas after winning the Big Ten title game, Alvarez agreed to coach his fourth Rose Bowl before handing off his program to Andersen, who met with Alvarez on the field before the game. But the Badgers' third consecutive January in Pasadena ended in much the same way as the last two: With the offense failing to get the late score the Badgers desperately needed.

"This stings just as much, because we fell extremely short when we had the opportunity to win," Ball said. "We had numerous opportunities to capitalize on big plays, and we fell short. ... This is not the way we want to be remembered. Speaking for the entire senior group, this is not the way we wanted to go out."

Curt Phillips went 10 for 16 for 83 yards passing and that crucial interception for Wisconsin, doing more with 64 yards on the ground. Jordan Fredrick caught his first career TD pass right before halftime, but no Badgers receiver had more than Jared Abbrederis' three catches.

And though Ball became the first player to score touchdowns in three Rose Bowls, the powerful back fell short of Ron Dayne's career Rose Bowl rushing record, swarmed under by waves of tacklers from one of the toughest defenses in the nation — a defense that shut down the top-ranked Ducks in mid-November to pave Stanford's path to Pasadena.

Wisconsin became the first five-loss team to make the Rose Bowl by steamrolling Nebraska in the conference title game, becoming the first Big Ten team in three straight Rose Bowls since Michigan in the late 1970s.

With the Rose Bowl filled with fans wearing the schools' near-identical cardinal-and-white gear, Stanford went up 14-0 on Taylor's 3-yard TD run just 8½ minutes in. Wisconsin briefly got rolling behind Ball, who rushed for 296 yards in his first two Rose Bowls.

Stanford stopped James White inside the 1 on fourth down early in the second quarter, but Ball scored on the next drive. The Badgers then mounted an 85-yard drive in the waning minutes of the first half ending with Fredrick's short TD catch.

After a scoreless third quarter, Wisconsin's personal foul on a fair-catch punt return finally sparked the Cardinal early in the fourth. Stanford got inside the Wisconsin 5 before stalling, and Jordan Williamson's short field goal put the Cardinal up by six points with 4:23 to go.

The Badgers got to midfield, but Phillips threw behind Jacob Pedersen, and Amanam easily made the pick.

"I just happened to be at the right place at the right time," Amanam said. "We were able to kind of seal the game on that one."

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