NEW YORK (Reuters) - Wall Street is set to end 2007 with modest gains this week and kick off the new year with all eyes trained on jobs data for signs of recession that could make 2008 a hostile environment for stocks.

      Volume will probably be thin on Monday, when New Year's Eve coincides with the final trading day of 2007. The market will be shut for New Year's Day on Tuesday. But Wednesday, Thursday and Friday will be closely watched because the first five trading days tend to mirror the market's performance over the course of the year.

      "There will be cash flows that come in right at the beginning of the year that portfolio managers try to get deployed early," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co, in Lake Oswego, Oregon. "That may give us a lift, unless they decide to take their time and survey the overall economic landscape."

      The financial and consumer discretionary sectors were the two major victims of the subprime mortgage meltdown in 2007. Of the 10 S&P major industry groups, they were the only ones to end the year in negative territory.

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      NEW YORK (CNNMoney.com) -- "Stocks tanked Thursday, after gaining some momentum earlier in the week, as political turmoil in Pakistan turned deadly and downbeat economic reports took the wind out of Wall Street's sails.

      The Dow Jones industrial average (INDU) fell nearly 1.4 percent. The broader S&P 500 (SPX.X) index shed nearly 1.3 percent. The tech-laden Nasdaq (COMPX) lost 1.7 percent.

      Treasury prices were higher. The dollar fell against the euro and the yen. Oil and gold prices rose.

      Wall Street had seen signs of recovery earlier in the week, rallying in a shortened session on Monday, then ending slightly higher in Wednesday's session. But Thursday's session was hit with bad news early on and could not shake the negative sentiment.

      Former Pakistani Prime Minister Benazir Bhutto was assassinated Thursday in a suicide attack in Rawalpindi, Pakistan. Investors worry that Bhutto's assassination will cause further political strife in Pakistan, a country with nuclear capabilities, and upset world markets.

      Markets were also shaken by a number of economic reports released early Thursday highlighting concerns about the strength of the economy.

      "The assassination of Benazir Bhutto got the market off on a bad foot and now we're seeing a lot of selling on the negative economic news," said Fred Dickson, chief market strategist at D.A. Davidson & Co.

      The number of shares changing hands Thursday has been unusually low, since many Wall Street traders are on vacation this week. This means that the market's reaction to new developments, good or bad, could be exaggerated, according to Dickson.

      "In the absence of any good news, there's nothing to bring the buyers in," he added.

      On the economic front, the U.S. Commerce Department said factory orders for November came in lower than expected.

      Meanwhile, the U.S. Labor Department said that the number of workers applying for unemployment benefits last week was higher than expected..."

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U.S. duragble goods weaker than expected in November

Mortgage applications fall to lowest in a year

      SINGAPORE (Reuters) - "Oil rose for a fifth day to $97 a barrel on Friday, within sight of its record high after U.S. crude stocks fell more sharply than expected, and geopolitical tensions mounted in Pakistan and northern Iraq.

      U.S. light, sweet crude oil for February delivery rose 41 cents to $97.03 a barrel by 0221 GMT, taking gains since December 20 to nearly $6 a barrel or over 6.5 percent.

      London Brent crude rose 23 cents to $95.01 a barrel.

      Prices surged to a one-month high of $97.79 a barrel on Thursday -- within $1.50 of their all-time record -- after data showed U.S. crude oil inventories fell 3.3 million barrels in the week to December 21, three times more than forecast.

      "The larger-than-anticipated crude draw, coupled with a sizeable decline in distillate inventories, sent the oil complex higher," JP Morgan analysts wrote in a research note.

      U.S. crude stocks now stand at their lowest in nearly three years, despite a pick-up in imports. Stocks of distillates including heating oil fell by 2.8 million barrels, according to the U.S. Energy Information Administration.

      A statement from the U.N. agency said tests in its special laboratories in Cairo and London had established the "human infection" through presence of the virus "collected from one case in an affected family."

      But it said a WHO team invited to Pakistan to look into an outbreak involving up to nine people, from late October to December 6 had found no evidence of sustained or community human-to-human transmission.

      No identified close contacts of the people infected, including health workers and other members of the affected family, had shown any symptoms and they had all been removed from medical observation, the WHO added.

      The outbreak followed a culling of infected chickens in the Peshawar region, in which a veterinary doctor was involved. Subsequently he and three of his brothers developed proven or suspected pneumonia.

      The brothers cared for one another and had close personal contact both at home and in the hospital, a WHO spokesman in Geneva said. One of them, who was not involved in the culling, died on November 23.

      His was the human-to-human transmission case confirmed by the WHO. The others all recovered.

      "All the evidence suggests that the outbreak within this family does not pose a broader risk," the WHO spokesman told Reuters. "But there is already heightened surveillance and there is a need for ongoing vigilance.".."

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      NEW YORK (CNNMoney.com) -- "John Norris' family is drinking a lot less milk these days. He said he considers the higher prices and has cut back on his kids' milk consumption. But between work and family obligations, he still drives almost as much as he used to.

      "That's the reason I cut down on milk consumption - so I can drive my car," said Norris.

      And Norris should know. He's the director of wealth management for Oakworth Capital Bank and a food price expert.

      The Norrises aren't the only family getting pinched at the grocery store. Prices of food and non-alcoholic beverages rose 4.7 percent since the beginning of the year through November, outpacing the 4.3 percent increase in the overall cost-of-living, according to the federal government's Consumer Price Index.

      Everyday foods like fruits and vegetables, beef, poultry and cereals are on the rise. The price of milk is the biggest culprit, with a staggering increase of 23.2 percent through November. And with basic foods like dairy and wheat driving up the cost of other groceries, almost everyone is feeling the squeeze.

      Families with children, who typically go through a couple gallons of milk per week and spend hundreds of dollars on other groceries, are especially vulnerable.

      "Kids need a lot more food than we do," said John Mulhern, a grandfather and one of several shoppers who spoke to CNNMoney.com outside a Key Food grocery in Brooklyn. "So your hearts go out to young families, especially [those who] have multiple children. They're the ones who are hurting the most with the rising prices."

      Marie Thompson, a mother from Brooklyn with a couple of kids in tow at the grocery store, said she spends hundreds of dollars a week on groceries, including two gallons of milk.

      "It seems to me that I spend more and more every week on food," said Thompson. "It's hard, because I have three children at home so there are five of us to feed. Beef is very expensive. The milk is very expensive. Even the butter has gone up."

      Even with gasoline prices soaring, milk still tops gas prices. The nationwide average for a gallon of whole milk is $3.80, according to the U.S. Department of Agriculture. That dwarfs the nationwide average of $2.99 for a gallon of unleaded, according to AAA.

      "A lot of basic foodstuffs seem to be going up and dairy products are going through the roof," said Norris of Oakworth Capital.

      It's not just milk-drinking kids - coffee drinkers are taking a hit from higher dairy prices as well. Back in August, Starbucks Corp. chief executive Jim Donald blamed "rising expenses, particularly higher dairy costs" for a 9-cent rise in the price of coffee drinks. For the first time in three years, Starbucks reported a 1 percent drop in customer visits to their stores, even as the value per transaction increased 5 percent.

      Many retailers, including industry leaders like Wal-Mart, absorb the initial cost increases for basic food items to stay competitive, said Charles Cerankosky, food marketing analyst for FTN Midwest Securities Corp.

      "For things that are purchased day after day like milk, retailers take a more judicious view about passing it on," said Cerankosky. "You don't want to be looked at as the guy who started raising prices."

      At first, retailers keep down prices for "high visibility" items like milk and make up for it by increasing the price of other items, like apples, said Cerankosky. But this is just a temporary measure, and eventually the price of milk will go up anyway, he said.

      Of the Brooklyn shoppers interviewed for this story, none of them said that they were eating less, but a couple of them said there will be fewer Christmas presents under the tree this year. Santa's tightening his belt, so the kids don't have to.

      But if price increases continue into 2008, families will have an even harder time stocking their pantries.

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      PORTLAND, Maine (Reuters) - "Oil rose 2 percent on Wednesday ahead of a government report expected to show crude inventories in the world's top consumer fell for a sixth straight week.

      Prices also gained as Turkish war planes bombed Kurdish guerrilla targets in northern Iraq on Wednesday, a reminder to investors of risks to crude supplies in the Middle East.

      U.S. crude settled up $1.84 to $95.97 a barrel after climbing as high as $96.54, the loftiest since late November. London Brent settled up $1.24 at $93.94 in thin volume due to the holiday in the United Kingdom.

      U.S. inventory data, to be released on Thursday, a day later than normal due to the Christmas holiday, is expected to show crude stocks fell by 1 million barrels as bad weather in Texas and the Gulf slowed imports.

      Crude stockpiles in the United States are already at their lowest level in nearly three years, stoking fears of a winter supply crunch.

      Adding support, the Turkish military said its offensive against outlawed separatist Kurdistan Workers Party (PKK) guerrillas inside Turkey and across the border in northern Iraq would continue..."

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      Still, the extent of sea ice recorded in November was well shy of the median extent observed over the past quarter century, as the image from Nov. 14 (above, right) shows. The dramatic increase in ice is evident, when compared to the record-low amount observed Sept. 16 (below, right). In both images, 100% sea ice is shown in white, and the yellow line encompasses the area ion which there was at least 15% ice cover in at least half of the 25-year record for the given month.

      The record melting of Arctic sea ice this summer was widely viewed as a harbinger of global warming, though unusual wind patterns played a role and many factors affecting fluctuations in Arctic ice are poorly understood by scientists. Still, so much ice melted that the fabled Northwest passage opened for the first time in history, and the melting broke a record, set just two years ago and by a country mile, that at the time was seen as unprecedented and worrying.

      The area of persistent open water north of Alaska and eastern Siberia, according to NASA, is unusual for this time of year, though not unprecedented. This area was also largely free of ice in November 2002 and especially November 2006.

      Here's how NASA explains the record re-growth of ice over that 10-day period in October and November:

Record sea ice growth rates after a record low may sound surprising at first, but it is not completely unexpected. The more ice that survives the summer melt, the less open water there is for new ice to grow. When summertime ice extent hits a record low, on the other hand, large areas of open water provide room for the ice to grow once temperatures cool off enough. While summer warming of the upper ocean surface can cause wintertime sea ice regrowth to lag initially, as the fall season progresses and sunlight weakens, the rate of energy loss from the ocean increases. That heat loss coupled with a large area of open water creates ideal conditions for sea ice to form rapidly over large areas..."

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      Lots that Mr. Carey once bought for $10,000 were now going for 10 times that. During the best times back in Ohio, he once earned about $100,000 in a year. At the height of the Florida boom, in 2005, he says he raked in $800,000. “If you just got up and went to work,” he says, “pretty much anybody could become an overnight millionaire.”

      National home builders poured in, along with construction workers, roofers and electricians. But as a kingdom of real estate materialized, growth ultimately exceeded demand: investors were selling to one another, inflating prices. When the market figured this out in late 2005, it retreated with punishing speed.

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      SULAIMANIYA, Iraq (Reuters) - "Turkish planes bombed an area of Iraq near the border with Turkey on Tuesday to attack Kurdish separatists and the army said it had killed at least 150 guerrillas in its air offensive earlier this month.

      A Turkish military source said warplanes launched the limited strike on Tuesday after spotting Kurdistan Workers Party (PKK) guerrillas during a reconnaissance flight. He said the strike was smaller than others in recent weeks.

      Colonel Hussein Tamar, director of Iraq's border guard command in the northern Kurdish province of Dahuk, said villages near the border were hit but nobody was hurt.

      The area was depopulated because residents had fled earlier attacks, he said.

      The Turkish military also said it killed five members of the PKK on Tuesday in an attack on the outlawed group within Turkey.

      Turkey has repeatedly bombed areas of northern Iraq in pursuit of PKK rebels over the past few weeks. Ground troops have also made occasional cross-border raids, although a large-scale assault is seen as unlikely, especially in winter.

      Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects.

      As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.

      "Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.

      "It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.

      Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor - the interbank rates used to price contracts and Club Med mortgages - are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.

      York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.

      "The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.

      "They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds..."

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      MILWAUKEE, Wisconsin (AP) -- "Highways were hazardous for holiday travelers Sunday and thousands of homes and businesses had no electricity in the Midwest as a storm blustered through the region with heavy snow and howling wind.

      At least 11 deaths had been blamed on the storm.

      Winter storm warnings were posted for parts of Minnesota, Wisconsin and Michigan on Sunday as the core of the storm headed north across the Great Lakes.

      Parts of Wisconsin already had a foot of snow, and up to a foot was forecast Sunday in northeastern Minnesota, the National Weather Service said.

      Radar showed snow falling across much of Wisconsin and eastern Minnesota on Sunday and moving into parts of Michigan and Indiana.

      "Everything is just an ice rink out there," said Sgt. Steve Selby with the sheriff's department in Rock County, Wisconsin.

      The weather system also spread locally heavy rain on Sunday from the Southeast to the lower Great Lakes.

      The storm rolled through Colorado and Wyoming on Friday, then spread snow and ice on Saturday from the Texas Panhandle to Minnesota. Multi-car pileups closed parts of several major highways Saturday in the Plains states.

      The area of Madison, Wisconsin, got three to four hours of freezing rain early Sunday, said weather service meteorologist intern Bill Borghoff at Sullivan. The combination of icy pavement and gusty wind made driving treacherous, he said..."

      The Bottom Line:  Winter blew in with a bang.