Sandy's death toll climbs; millions without power

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NEW YORK (AP) — Millions of people from Maine to the Carolinas awoke Tuesday without electricity, and an eerily quiet New York City was all but closed off by car, train and air as superstorm Sandy steamed inland, still delivering punishing wind and rain. The U.S. death toll climbed to 39, many of the victims killed by falling trees.

The full extent of the damage in New Jersey, where the storm roared ashore Monday night with hurricane-force winds of 80 mph, was unclear. Police and fire officials, some with their own departments flooded, fanned out to rescue hundreds.

"We are in the midst of urban search and rescue. Our teams are moving as fast as they can," Gov. Chris Christie said. "The devastation on the Jersey Shore is some of the worst we've ever seen. The cost of the storm is incalculable at this point."

More than 8.2 million people across the East were without power. Airlines canceled more than 15,000 flights around the world, and it could be days before the mess is untangled and passengers can get where they're going.

The storm also disrupted the presidential campaign with just a week to go before Election Day.

President Barack Obama canceled a third straight day of campaigning, scratching events scheduled for Wednesday in swing state Ohio. Republican Mitt Romney resumed his campaign, but with plans to turn a political rally in Ohio into a "storm relief event."

Sandy will end up causing about $20 billion in property damage and $10 billion to $30 billion more in lost business, making it one of the costliest natural disasters on record in the U.S., according to IHS Global Insight, a forecasting firm.

Lower Manhattan, which includes Wall Street, was among the hardest-hit areas after the storm sent a nearly 14-foot surge of seawater, a record, coursing over its seawalls and highways.

Water cascaded into the gaping, unfinished construction pit at the World Trade Center, and the New York Stock Exchange was closed for a second day, the first time that has happened because of weather since the Blizzard of 1888. The NYSE said it will reopen on Wednesday.

A huge fire destroyed as many as 100 houses in a flooded beachfront neighborhood in Queens on Tuesday, forcing firefighters to undertake daring rescues. Three people were injured.

New York University's Tisch Hospital evacuated 200 patients after its backup generator failed. About 20 babies from the neonatal intensive care unit were carried down staircases and were given battery-powered respirators.

A construction crane that collapsed in the high winds on Monday still dangled precariously 74 floors above the streets of midtown Manhattan, and hundreds of people were evacuated as a precaution. And on Staten Island, a tanker ship wound up beached on the shore.

Most major tunnels and bridges in New York were closed, as were schools, Broadway theaters and the metropolitan area's three main airports, LaGuardia, Kennedy and Newark.

With water standing in two major commuter tunnels and seven subway tunnels under the East River, Mayor Michael Bloomberg said it was unclear when the nation's largest transit system would be rolling again. It shut down Sunday night ahead of the storm.

Joseph Lhota, chairman of the Metropolitan Transportation Authority, said the damage was the worst in the 108-year history of the New York subway.

Similarly, Consolidated Edison said it could take at least a week to restore electricity to the last of the nearly 800,000 customers in and around New York City who lost power.

Millions of more fortunate New Yorkers surveyed the damage as dawn broke, their city brought to an extraordinary standstill.

"Oh, Jesus. Oh, no," Faye Schwartz said she looked over her neighborhood in Brooklyn, where cars were scattered like leaves.

Reggie Thomas, a maintenance supervisor at a prison near the overflowing Hudson River, emerged from an overnight shift, a toothbrush in his front pocket, to find his Honda with its windows down and a foot of water inside. The windows automatically go down when the car is submerged to free drivers.

"It's totaled," Thomas said with a shrug. "You would have needed a boat last night."

Around midday, Sandy was about 120 miles east of Pittsburgh, pushing westward with winds of 45 mph, and was expected to make a turn into New York State on Tuesday night. Although weakening as it goes, the storm will continue to bring heavy rain and flooding, said Daniel Brown of the National Hurricane Center in Miami.

In a measure of the storm's immense size and power, waves on southern Lake Michigan rose to a record-tying 20.3 feet. High winds spinning off Sandy's edges clobbered the Cleveland area early Tuesday, uprooting trees, cutting power to hundreds of thousands, closing schools and flooding major roads along Lake Erie.

In Portland, Maine, gusts topping 60 mph scared away several cruise ships and prompted officials to close the port.

Sandy also brought blizzard conditions to parts of West Virginia and neighboring Appalachian states, with more than 2 feet of snow expected in some places. A snowstorm in western Maryland caused a pileup of tractor-trailers that blocked part of Interstate 68 on slippery Big Savage Mountain.

"It's like a long-tailed cat in a room full of rocking chairs up here," said Bill Wiltson, a Maryland State Police dispatcher.

The death toll climbed rapidly, and included 17 victims in New York State — 10 of them in New York City — along with five dead in Pennsylvania and five in New Jersey. Sandy also killed 69 people in the Caribbean before making its way up the Eastern Seaboard.

In New Jersey, Sandy cut off barrier islands, swept houses from their foundations and washed amusement pier rides into the ocean. It also wrecked several boardwalks up and down the coast, tearing away a section of Atlantic City's world-famous promenade. Atlantic City's 12 waterfront casinos came through largely unscathed.

Jersey City was closed to cars because traffic lights were out, and Hoboken, just over the Hudson River from Manhattan, was hit with major flooding.

A huge swell of water swept over the small New Jersey town of Moonachie, near the Hackensack River, and authorities struggled to rescue about 800 people, some living in a trailer park. And in neighboring Little Ferry, water suddenly started gushing out of storm drains overnight, submerging a road under 4 feet of water and swamping houses.

Police and fire officials used boats and trucks to reach the stranded.

"I looked out and the next thing you know, the water just came up through the grates. It came up so quickly you couldn't do anything about it. If you wanted to move your car to higher ground you didn't have enough time," said Little Ferry resident Leo Quigley, who with his wife was taken to higher ground by boat.

___

Hays reported from New York and Breed reported from Raleigh, N.C.; AP Science Writer Seth Borenstein contributed to this report from Washington. Associated Press writers David Dishneau in Delaware City, Del., Katie Zezima in Atlantic City, Emery P. Dalesio in Elizabeth City, N.C., and Erika Niedowski in Cranston, R.I., also contributed.

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China wants to stop profiteering at temple sites

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BEIJING (AP) — China is telling tourist-favored Buddhist temples: Don't let money be your mantra.

Authorities announced a ban this week on temples selling shares to investors after leaders of several popular temples planned to pursue stock market listings for them as commercial entities. Even the Shaolin Temple of kung fu movie fame was once rumored to be planning a stock market debut — and critics have slammed such plans as a step too far in China's already unrestrained commercial culture.

"Everywhere in China now is about developing the economy," complained Beijing resident Fu Runxing, a 40-year-old accountant who said he recently went to a temple where incense was priced at 300 yuan ($50) a stick.

"It's too excessive. It's looting," she said.

Centuries-old Buddhist pilgrimage sites Mount Wutai in Shanxi province, Mount Putuo in Zhejiang and Mount Jiuhua in Anhui all were moving toward listing on stock markets in recent months to finance expansions, according to state media.

The government's religious affairs office called on local authorities to ban profiteering related to religious activity and told them not to allow religious venues to be run as business ventures or listed as corporate assets.

Companies that manage temple sites may be able to bypass the prohibition on listing shares simply by excluding the temples themselves from their lists of assets. A Buddhist site at Mount Emei in Sichuan already has been on the Shenzhen stock exchange since 1997 but its listed assets include a hotel, cable car company and ticket booths — not the temples, which date back several hundred years. Shanghai lawyer Wang Yun said the new prohibition wouldn't likely affect Emei, but might make additional companies think twice before listing.

Turning religious sites into profit-making enterprises is certainly not limited to China, but it illustrates just how commercialized this communist country has become in the past couple of decades, with entrepreneurs seizing on every opportunity to make money. One businessman has started selling canned "fresh air" in polluted Beijing.

No one could have anticipated that the poor and egalitarian China of Mao Zedong's time would become a "Wild West" of commercialism, said Mary Bergstrom, founder of The Bergstrom Group, a marketing consultancy in Shanghai.

"There aren't the established checks and balances in China that exist in other countries ,so people are more willing and able to test the boundaries of what is acceptable, especially if the end result of these tests is potential profit," she said.

The Chinese government has strict controls on religion, with temples, churches and mosques run by state-controlled groups. Even so, religion is booming, along with tourism, giving some places a chance to cash in.

The ban on profiteering from religious activity is "just a reflection of the terrible reality of the over-commercialization in recent years of temples and other places," the Southern Metropolis Daily said in an editorial Wednesday. "People who have been to famous religious places should be familiar with expensive ticket prices and donations for all kinds of things."

Chinese entities from nature parks to religious sites are increasingly turning to commercial activities to pay expenses as government support dwindles in a society with little charitable giving. Temples face heavy costs to maintain centuries-old buildings and gardens.

But the State Administration for Religious Affairs says some local governments, businesses and individuals have built religious sites for profit, hired fake monks and tricked visitors into handing over money.

A notice on its website Monday, issued jointly with the police ministry and other authorities, warned of serious punishment for officials found to be involved in religious profiteering.

The new rules leave open when commercialism crosses the line to profiteering. No matter where the line might be, entrepreneurial officials and religious groups may not heed it.

An employee of the Wutai Scenic District Administration's propaganda office confirmed Wednesday that the local government was planning to pursue a stock market listing but said he couldn't give details. The man, who would give only his surname, Bai, said he didn't know whether the latest notice would affect that plan.

The notion that some temples were becoming more about dollars than dharma first came to the fore in 2009 with reports that the legendary Shaolin monastery and martial arts center might sell shares to investors on a mainland or Hong Kong stock market.

The 1,500-year-old temple has become a lucrative business enterprise and holds registered trademarks, but its managers have denied rumors of floating shares and reiterated that denial Wednesday.

___

Associated Press researcher Flora Ji contributed to this report.

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Google unveils first 10-inch Nexus tablet

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SAN FRANCISCO (Reuters) - Google Inc unveiled a larger version of its Nexus-branded tablet computer on Monday, and updated its mobile gadget and online content offerings as competition with Apple Inc, Amazon.com Inc and Microsoft Corp heats up ahead of the holiday sales season.


The device follows a spate of new product launches by the technology leaders in recent weeks, including Apple's iPad Mini last week and software-maker Microsoft's first-ever home-built tablet, the Surface.


Google, the world's No.1 Internet search engine, has pushed deeper into the hardware business at a time when consumers are increasingly accessing the Web on mobile devices.


Google's new Nexus 10, made in partnership with consumer electronics company Samsung Electronics Co, is the first 10-inch tablet to come to market under Google's Nexus brand. The device, with prices starting at $299, will be available on November 13 in the United States and seven other countries, Google said in its official blog on Monday.


Google was scheduled to introduce the device at a media event in New York on Monday, but was forced to cancel because of Hurricane Sandy.


Google also said it was expanding its online movie and music retail businesses to several countries in Europe.


And the company introduced an improvement to its online-music storage service. The new "matching" feature scans songs in a consumer's music collection and automatically creates an online or "cloud-based" library of the same tracks which consumers can access from any device or computer.


Google said the music matching feature, which only works with tracks that are part of the Google Play store's music catalog, will be available in Europe on November 13 and in the United States soon after.


Google also updated its smaller, Nexus 7 tablet released earlier this year. It increased the storage on the $199 version of the device to 16GB from 8GB, and introduced a new $299 version of the Nexus 7 with a cellular data service option. Google also unveiled a new Nexus 4 smartphone, made in partnership with LG Electronics, that features a quad-core processor and a 4.7-inch display.


(Reporting by Alexei Oreskovic; Editing by Richard Chang)


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'Anderson Live' to end after 2 seasons

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LOS ANGELES (AP) — Anderson Cooper's daytime talk show will be wrapping after two seasons.

Warner Bros. said Monday that the marketplace made it increasingly difficult for "Anderson Live" to "break through" to viewers despite format changes.

The show switched to live broadcasts in its second year but struggled to match the ratings performance of daytime frontrunners including "Ellen" and "Live! With Kelly and Michael."

Newcomers, including Katie Couric, also made the talk show arena more competitive.

In a statement, Cooper said he was grateful to Warner's Telepictures syndication arm for the opportunity and proud of his staff's work.

Cooper, who remains host of CNN's "Anderson Cooper 360," will continue with "Anderson Live" through summer 2013, Warner said.

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Northeast hunkers down ahead of Hurricane Sandy

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ATLANTIC CITY, N.J. (AP) — Hurricane Sandy wheeled toward land as forecasters feared Monday, raking cities along the Northeast corridor with rain and wind gusts, flooding shore towns, washing away a section of the Atlantic City Boardwalk, and threatening to cripple Wall Street and New York City's subway system with a huge surge of corrosive seawater.

By midday, the storm was picking up speed and was expected to blow ashore in New Jersey early in the evening, hours sooner than previously expected. Forecasters warned it would combine with two other weather systems — a wintry storm from the west and cold air rushing in from the Arctic — to create an epic superstorm.

From Washington to Boston, subways, buses, trains and schools were shut down and more than 7,000 flights grounded across the region of 50 million people. The New York Stock Exchange was closed. And hundreds of thousands of people were under orders to move to higher ground to await the storm's fury.

President Barack Obama and Mitt Romney suspended their campaigning with just over a week to go before Election Day.

At the White House, the president made a direct appeal to those in harm's way: "Please listen to what your state and local officials are saying. When they tell you to evacuate, you need to evacuate. Don't delay, don't pause, don't question the instructions that are being given, because this is a powerful storm."

Authorities warned that New York City and Long Island could get the worst of the storm surge: an 11-foot onslaught of seawater that could swamp lower Manhattan, flood the subways and cripple the underground network of electrical and communications lines that are vital to the nation's financial capital.

Because of Sandy's vast reach, with tropical storm-force winds extending almost 500 miles from its center, other major cities across the Northeast — Washington, Baltimore, Philadelphia and Boston — also prepared to for the worst.

"The days ahead are going to be very difficult," Maryland Gov. Martin O'Malley said. "There will be people who die and are killed in this storm."

Sheila Gladden evacuated her home in Philadelphia's flood-prone Eastwick neighborhood and headed to a hotel.

"I'm not going through this again," said Gladden, who had 5 1/2 feet of water in her home after Hurricane Floyd in 1999.

By early afternoon, the storm was 110 miles southeast of Atlantic City, its winds at 90 mph. It had speeded up to 28 mph and had begun the turn toward the coast that forecasters had feared.

As the storm closed in, it washed away an old section of the world-famous Atlantic City Boardwalk and left most of the city's emptied-out streets under water. All 12 casinos in the city were closed, and some 30,000 people were under orders to evacuate.

"When I think about how much water is already in the streets, and how much more is going to come with high tide tonight, this is going to be devastating. I think this is going to be a really bad situation tonight," said Bob McDevitt, president of the main Atlantic City casino workers union.

New Gov. Chris Christie, addressing those who were told to evacuate the state's barrier islands, said in his usual blunt way: "This is not a time to be a show-off. This is not a time to be stupid. This is the time to save yourself and your family."

In New York City, where 375,000 people were warned to evacuate, authorities moved to close the Holland Tunnel, which connects New York and New Jersey, and a tunnel between Manhattan and Brooklyn. Street grates above the subway were boarded up, but officials worried that seawater would seep in and damage the electrical switches.

In the morning, water was already splashing over the seawalls at the southern tip of Manhattan and had matched the levels seen during Hurricane Irene in August 2011. Still, people were out jogging, walking their dogs and even taking children out in strollers amid gusts of wind.

"We're high up enough, so I'm not worried about flooding," said Mark Vial, who was pushing his 2-year-old daughter, Maziyar, in a stroller outside their building, where they live on the 15th floor. "There's plenty of food. We'll be OK."

Water was already a foot deep on the streets of Lindenhurst, N.Y., along the southern edge of Long Island, and the canals around the island's Great South Bay were bulging two hours before high tide.

The major American stock exchanges closed for the day, the first unplanned shutdown since the Sept. 11 attacks in 2001. Wall Street expected to remain closed on Tuesday. The United Nations canceled all meetings at its New York headquarters.

New York called off school on both Monday and Tuesday for the city's 1.1 million students, and the more than 5 million people who depend on its transit network every day were left without a way to get around.

Sandy, a Category 1 hurricane, was blamed for 69 deaths in the Caribbean before it began traveling northward, parallel to the Eastern Seaboard. Forecasters said the combined Frankenstorm could bring close to a foot of rain in places, a potentially lethal storm surge of 4 to 11 feet, and punishing winds that could cause widespread power outages that last for days. Up to 3 feet of snow was forecast for the West Virginia mountains.

About 90 miles off Cape Hatteras, N.C., the Coast Guard rescued 14 crew members by helicopter from the HMS Bounty, a replica 18th-century sailing ship that sank in the storm. The Coast Guard searched for two other crew members. The ship was built for the 1962 Marlon Brando film "Mutiny on the Bounty."

The rescued had donned survival suits and life jackets and boarded two lifeboats after the ship began taking on water. They were plucked from 18-foot seas just before sunrise.

O'Malley, the Maryland governor, said a fishing pier in the beach resort of Ocean City, not far from a popular boardwalk and amusement park, was "half-gone." The area had been ordered evacuated on Sunday.

Craig Fugate, chief of the Federal Emergency Management Agency, said FEMA teams were deployed from North Carolina to Maine and as far inland as West Virginia, bringing generators and basic supplies that will be needed in the storm's aftermath.

"I have not been around long enough to see a hurricane forecast with a snow advisory in it," Fugate told NBC's "Today" show.

___

Breed reported from Raleigh, N.C.; Contributing to this report were AP Science Writer Seth Borenstein in Washington; Katie Zezima in Atlantic City, N.J.; David Porter in Pompton Lakes, N.J.; Wayne Parry in Point Pleasant Beach, N.J.; and David Dishneau in Delaware.

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UN says 22,000 displaced in Myanmar unrest

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SITTWE, Myanmar (AP) — Victims of Myanmar's latest explosion of Muslim-Buddhist violence fled to already packed displacement camps along the country's western coast Sunday, with a top U.N. official saying the unrest has forced more than 22,000 people from their homes.

State television reported the casualty toll has risen to 84 dead and 129 injured over the past week in nine townships in Rakhine state. The figures have not been broken down by ethnic group, but New York-based Human Rights Watch has said Rohingya Muslims bore the brunt of the unrest and the true death toll may be far higher.

On Sunday, wooden boats carrying some refugees arrived outside the state capital, Sittwe. The people trudged to the nearby Thechaung camp, a place already home to thousands of Rohingya who took refuge there after a previous wave of violence in June.

"I fled my hometown, Pauktaw, on Friday because there is no security at all," said 42-year-old fisherman Maung Myint, who arrived on a boat carrying 40 other people, including his wife and six children. "My house was burned to ashes and I have no money left."

Another Muslim refugee said she fled her village, Kyaukphyu, on Thursday after attackers set her home on fire.

"We don't feel safe," said 40-year-old Zainabi, a fish seller who left with her two sons, aged 12 and 14. "I wish the violence would stop so we can live peacefully."

Human Rights Watch released dramatic satellite imagery of Kyaukphyu on Saturday showing a vast, predominantly Rohingya swath of the village in ashes. The destruction included more than 800 buildings and floating barges.

There were no reports of new violence Sunday. It was unclear what sparked the latest clashes, but ill will between Muslims and Buddhists in Rakhine state goes back decades and has its roots in a dispute over the Rohingya's origins. Although many Rohingya have lived in Myanmar for generations, they are seen as foreign intruders who came from Bangladesh to steal scarce land.

Today, the Rohingya also face official discrimination, a policy encouraged by Myanmar's previous military regimes to enlist popular support among other groups. A 1984 law formally excluded them as one of the country's 135 ethnicities, meaning most are denied basic civil rights and are deprived of citizenship.

Neighboring Bangladesh, which also does not recognize the Rohingya as citizens, says thousands of Rohingya refugees have sought to flee there by boat. Its policy, however, is to refuse them entry.

Rights groups say Myanmar's failure to address the root causes of the crisis means the situation may get worse.

Over the weekend, Border Affairs Minister Lt. General Thein Htay traveled to the affected areas with the U.N. resident and humanitarian coordinator in Myanmar, Ashok Nigam.

Nigam said 22,587 were displaced and they included both Muslims and ethnic Rakhine Buddhists, but he gave no breakdown.

Speaking to The Associated Press on Sunday while visiting Thechaung camp, Nigam said getting aid to the new wave of displaced people will be a challenge as some fled on boats and others have sought refuge on isolated hilltops.

"The situation is certainly very grave and we are working with the government to provide urgent aid to these people," he said.

Some 4,600 homes were also destroyed, according to the U.N, which said in a separate statement that it had begun distributing emergency food and shelter supplies with its humanitarian partners to refugees in urgent need of help.

The latest unrest pushes the total displaced to nearly 100,000 since sectarian clashes broke out in June, when at least 90 people died and 3,000 homes were destroyed. That unrest left about 75,000 people, mostly Rohingya, living in refugee camps since then. Curfews have been in place in some areas since the earlier violence and were extended this past week.

"It is critically important that the government ensures that the rule of law prevails, prevents any further spreading of this violence and continues to communicate strong messages of harmony," Nigam said in a statement later Sunday.

"The violence, fear and mistrust are contrary to the democratic transition and economic and social development that Myanmar is committed to," Nigam said. "It should not become an impediment to progress."

___

Associated Press writer Aye Aye Win in Yangon, Myanmar, and Todd Pitman in Bangkok contributed to this report.

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SAP eyes "long" period of high sales growth: report

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Broadway takes few chances with superstorm coming

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NEW YORK (AP) — Broadway took the threat of the mammoth storm seriously, with theater owners canceling all Sunday evening and Monday performances of shows like "The Book of Mormon" ''Once" and "Mama Mia!" long before a drop of rain fell in Times Square.

"The safety and security of theatregoers and employees is everyone's primary concern," said Charlotte St. Martin, executive director of The Broadway League, which represents producers.

Forecasts called for rain late Sunday or early Monday, and subway and public transportation service is to be halted Sunday evening, potentially stranding theatergoers. Refunds will be made available from the point of purchase.

Off-Broadway shows including "Stomp," ''Bad Jews" and "Golden Child" were also canceled Sunday night. Most matinees on and off Broadway stayed open. Mondays are usually very light on Broadway, with most shows having that as their day off.

Some Broadway shows had no evening shows scheduled Sunday, including "Cyrano de Bergerac," ''Annie," ''Chaplin," ''Enemy of the People," ''Once," ''Jersey Boys" and "Nice Work If You Can Get It."

It was the most disruptive storm for the theater community since the threat of Hurricane Irene in late August 2011 prompted producers to cancel matinee and evening performances on Saturday and Sunday. While that hurricane mostly fizzled over New York, every show lost money because they were mostly limited to five or six performances that week.

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FDA: Pharmacy tied to outbreak knew of bacteria

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WASHINGTON (AP) — Staffers at a pharmacy linked to the deadly meningitis outbreak documented dozens of cases of mold and bacteria growing in rooms that were supposed to be sterile, according to federal health inspectors.

In a preliminary report on conditions at the pharmacy, the Food and Drug Administration said Friday that even when the contamination at New England Compounding Center exceeded the company's own safety levels, there is no evidence that staffers investigated or corrected the problem. The FDA uncovered some four dozen reports of potential contamination in company records, stretching back to January this year.

The report comes from an FDA inspection of the Framingham, Mass.-based company earlier this month after steroid injections made by the company were tied to an outbreak of fungal meningitis. FDA officials confirmed last week that the black fungus found in the company's vials was the same fungus that has sickened 338 people across the U.S., causing 25 deaths.

The New England Compounding Center's lawyer said Friday the pharmacy "will review this report and will continue our cooperation with the FDA."

Compounding pharmacies like NECC traditionally fill special orders placed by doctors for individual patients, turning out a small number of customized formulas each week. They have traditionally been overseen by state pharmacy boards, though the FDA occasionally steps in when major problems arise. Some pharmacies have grown into much larger businesses in the last 20 years, supplying bulk orders of medicines to hospitals that need a steady supply of drugs on hand.

The FDA report provides new details about NECC's conditions, which were first reported by state officials earlier this week. The drug at the center of the investigation is made without preservative, so it's very important that it be made under highly sterile conditions. Compounding pharmacies prepare their medications in clean rooms, which are supposed to be temperature-controlled and air-filtered to maintain sterility.

But FDA inspectors noted that workers at the pharmacy turned off the clean room's air conditioning every night. FDA regulators said that could interfere with the conditions needed to prevent bacterial growth.

Inspectors also say they found a host of potential contaminants in or around the pharmacy's clean rooms, including green and yellow residues, water droplets and standing water from a leaking boiler.

Additionally, inspectors found "greenish yellow discoloration" inside an autoclave, a piece of equipment used to sterilize vials and stoppers. In another supposedly sterile room inspectors found a "dark, hair-like discoloration" along the wall. Elsewhere FDA staff said that dust from a nearby recycling facility appeared to be drifting into the pharmacy's rooftop air-conditioning system.

The FDA on Friday declined to characterize the severity of the problems at NECC, or to speculate on how they may have led to contamination of the products made by the pharmacy. FDA emphasized that the report is based on "initial observations" and that the agency's investigation is ongoing.

The agency also provided new details about the pharmacy's handling of the steroids it recalled last month. The company recalled three lots of steroids made since May that totaled 17,676 single-dose vials of medicine — roughly equivalent to 20 gallons. The shots are mainly used to treat back pain.

According to the agency's report, the pharmacy began shipping vials from the August lot to customers on Aug. 17. That was nearly two weeks before the pharmacy received test results from an outside laboratory confirming the sterility of the drug. When FDA scientists went back and tested the same lot this month, they found contamination in 50 vials.

Outside experts said the report paints a picture of a dysfunctional operation.

"The entire pharmacy was an incubator of bacteria and fungus," said Sarah Sellers, a former FDA officer who left the agency in 2008 after unsuccessfully pushing it to increase regulation of compounding pharmacies. She now consults for drug manufacturers. "The pharmacy knew this through monitoring results, and chose to do nothing."

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Analysis: Fiscal cliff could hit economy harder than many expect

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By Jason Lange


WASHINGTON (Reuters) - The United States runs the risk of a recession far deeper than many investors and policymakers may think if lawmakers fail to avert looming tax hikes and cuts to public spending.


Absent action by Congress, the country will face the so-called fiscal cliff at the start of next year, a combination of lower spending and higher taxes that is expected to extract about $600 billion from the economy.


Many economists think every dollar of deficit reduction will subtract nearly the same amount from economic growth.


By that measure, the current course could cause the economy to contract by 0.5 percent in 2013, according to estimates by the Congressional Budget Office (CBO) that have been largely embraced by Wall Street and the U.S. Federal Reserve.


But research by economists in academia and at the International Monetary Fund suggests a dollar of deficit reduction could drain as much as $1.70 from the economy, making the prospective belt tightening much more dangerous.


"You can take that 0.5 percent contraction and double it," said Barry Eichengreen, an economist at the University of California, Berkeley.


These researchers suspect fiscal contractions take a bigger-than-normal bite from economies when interest rates are very low, as is the case at the moment in the United States and in much of the developed world.


One explanation, Eichengreen said, is that when rates are higher, central banks can easily lower them to provide a counterweight to austerity. But when rates are near zero, as they are in the United States, it's harder to ease the pinch.


Historical data suggests higher taxes or lower government spending normally lead households to cut back on purchases only modestly. In the three decades through 2009, a dollar in government austerity would suck only half that from the economy, according to IMF research published this month which examined fiscal policy in 28 countries.


But economies around the world appear to be acting differently since the Great Recession. The IMF said it appeared that every dollar of recent fiscal consolidation has drained anywhere from $0.90 to $1.70 from economies.


The IMF said this suggested central banks have been having difficulty offsetting the impact from tighter budgets.


That could well be the case in the United States as well. The Fed pushed overnight rates to near zero in December 2008 and has resorted to the unconventional policy of purchasing government and housing-related bonds to revive the economy.


The central bank's chairman, Ben Bernanke, has acknowledged he would not be able to fully offset the pain if the economy runs into the "fiscal cliff."


With the U.S. jobless rate at 7.8 percent and the recovery still shaky, the possibility of a greater-than-expected hit to activity might be food for thought for lawmakers, who will be looking to cut some sort of deal on the budget before year end.


LET'S MAKE A DEAL


There's little room for error. Forecasters expect economic growth next year of just 2.1 percent, with the jobless rate edging down only slightly.


As it is, economists believe even the level of danger outlined by the nonpartisan CBO will be enough to propel lawmakers, who are deeply divided over taxes and spending, to reach an accord, although signs have yet to emerge that a deal is starting to gel.


"No political party wants to go down in history as the one that triggered the second half of the worst recession since the Great Depression," said Paul Dales, an economist with Capital Economics in London.


Capital Economics expects Congress will allow just under $100 billion in fiscal tightening, which it thinks would knock the same amount off gross domestic product (GDP).


Yields on U.S. government debt suggest investors as a whole are betting on even less tightening next year, according to research by analysts at Bank of America.


Bank of America itself expects lawmakers will allow much of the fiscal cliff to transpire, leading to about $325 billion in budget tightening, enough in their view to stall job growth.


Like Capital Economics and many other research units in the financial world, Bank of America presumes every dollar of tightening would drain the economy by about the same amount, although it says a bigger effect is possible.


"The economic impacts could be worse than our baseline assumptions," said Michael Hanson, an economist with the bank in New York.


Eichengreen and others who have studied economic data from the Great Depression, another time central banks were constrained, found the drag from a tightening of fiscal policy was much higher at the time. Eichengreen thinks currently the so-called multiplier is about 1.7, in line with the upper range of the IMF's estimate.


If he is right, even avoiding just half of the fiscal cliff would not be enough to steer the economy clear of recession.


Earlier this month, Senate Republican leader Mitch McConnell argued for not "a penny less" than $109 billion in budget tightening next year. But even a tightening in the budget of that magnitude would have an outsized effect if Eichengreen and others are on the mark.


"It would make more sense to assure a strong self-sustaining recovery before embarking on significant fiscal consolidation," Goldman Sachs economists said in a recent report that summarized research pointing to heightened risks of budget slashing.


(Reporting by Jason Lange; Editing by Tim Ahmann and Sandra Maler)

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