Fair Game: Credit-Rating Club Is Tough to Get Into

Ozier Muhammad/The New York Times

Ann Rutledge and her husband, Sylvain Raynes, of R&R Consulting, which has been trying to gain S.E.C. recognition as a debt ratings agency.

That was probably a common response to the news last week that the Justice Department had filed a civil suit against Standard & Poor’s, one of the two big credit ratings agencies that were so central to the mortgage boom and bust. The department said that S.& P. misled investors by presenting its ratings as the product of objective analyses when, the suit says, they were more about generating revenue to the firm. S.& P. denied the allegations, saying it was prepared to go to trial. 

Many people have been disappointed that S.& P. and Moody’s Investors Service, the big and powerful companies that are supposed to assess the creditworthiness of bonds, have escaped culpability. Not only do these companies still hold sway in securities markets, they’ve also hung on to their lush profits from the glory days of mortgage origination. During 2005 and 2006, for example, Moody’s made $238 million by rating complex mortgage instruments. Investors who trusted those ratings lost billions.

Given that the financial crisis began unfolding more than five years ago, it is discouraging to see how entrenched the large and established ratings companies remain. Ratings are still used to determine bank capital requirements, and investors rely heavily on them.

Over the years, lawmakers have tried to open up the duopolistic world of ratings agencies to greater competition and, therefore, better performance. Legislation in 2006 encouraged the Securities and Exchange Commission to let new companies into the ratings club. The commission set up the Office of Credit Ratings to register new entrants and to monitor all participants’ activities. Today, 10 credit ratings agencies are recognized by the S.E.C.

But gaining regulatory approval to join the ratings arena is exceedingly burdensome. That, at least, has been the experience of R&R Consulting, a firm with a stable of highly respected credit analysts and an enviable record of having predicted the mortgage mess in 2003.

R&R has been trying to get recognition as a credit rating agency since 2011. Frustrated by what it perceives as roadblocks erected by the S.E.C., its executives are beginning to wonder if the commission really wants increased competition.

The firm was founded in 2000 by Ann Rutledge and Sylvain Raynes, experts in structured finance who previously worked at Moody’s. It is a small shop, with seven employees, but its clients include investors, small and medium-size banks, financial regulators and other institutions. R&R’s specialty is risk measurement for all asset types.

R&R’s approach differs from traditional ratings agencies because, in addition to being able to rate new issues, it analyzes risks in securities that are trading in the secondary, or resale, market, after they are issued. By contrast, S.& P. and Moody’s became known for giving mortgage securities high ratings and downgrading them only when defaults were soaring. 

 “In the primary market, everyone prices a security around the credit rating,” Ms. Rutledge says. “In the secondary market, no one cares about the credit rating; what they want is valuation. We connect primary-market ratings with secondary-market valuations.”

THE R&R distinction between a rating and a valuation, however, seems to pose a problem when it comes to getting S.E.C. approval as a ratings agency, Ms. Rutledge says.

By law, many requirements must be met before a firm can become a ratings agency. Chief among them is that the applicant must provide letters from 10 “qualified institutional buyers” that have used the company’s ratings over the previous three years.

R&R has had difficulties with its letters. One was rejected because its writer identified the firm’s work as ratings or valuations, not simply as ratings, Ms. Rutledge says. Another letter failed to pass muster because it was from a German institution that characterized itself as the equivalent of a qualified institutional buyer. When a foreign institution could not get its letter notarized as required — notaries are not as common overseas — it was not good enough for the S.E.C.

And not all clients want to write such a letter for use by the S.E.C. Instead, some said they would discuss the company’s work by telephone. The S.E.C. rejected the idea.

“It’s extremely difficult for us to satisfy the ‘10 qualified institutional buyers’ requirement,” Ms. Rutledge says. “Proof that you’ve done business with them is not enough; it says you must have letters. And they have a suggested text for the letter. When we changed the text slightly they said it was not in conformity.”

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India Ink: Online Abuse of Teen Girls in Kashmir Leads to Arrests

SRINAGAR —Online abuse and a fatwa aimed at a rock band of Muslim teenage girls in Kashmir have led to arrests and a threat of a lawsuit.

Three men were arrested this week for posting threatening messages on the Facebook page of Praagaash, an amateur rock band in Indian-occupied Kashmir made of up Muslim girls. “The investigation is ongoing,” said Manoj Pandita, spokesman for the Jammu and Kashmir police, indicating that more arrests may follow.

The three men were charged under Section 66A of the Information Technology Act, which applies to “offensive” messages being sent through communication services, and Section 506 of the Ranbir Penal Code, which applies to criminal intimidation. Mr. Pandita said that it had been easy to track the I.P. addresses of the Facebook users.

A prominent human rights lawyer, Parvez Imroz of the Jammu and Kashmir Coalition of Civil Society, is planning to sue the top religious leader in Kashmir, who called for the fatwa, for “demonizing Kashmir before the international community” and for “running a parallel judicial system in the valley.”

Mr. Imroz told India Ink that human rights organizations like his needed support from the international community to highlight their concerns, and such fatwas reflected badly on the Kashmiri society. “He is diverting attention away from real issues of human rights to nonissues like music and purdah,” Mr. Imroz said.

The fatwa against the band was issued by the Grand Mufti Bashiruddin Ahmad.

In his fatwa, Mr. Ahmad advised women to only sing inside the house to other female members of the family, and wear a veil whenever they left the house. “They must stay within limits,” he said.

Following the band’s first live performance in December, Aneeqa Khalid, Noma Nazir and Farah Deeba, 10th-grade students who are 15 and 16 years old, became the target of abuse and threats on Facebook by people who accused them of being un-Islamic because they had performed in public, especially before men. Some commenters called them “sluts” and “prostitutes;” others suggested that they should be raped.

The band Praagaash, which means “darkness into light,” disbanded following a national controversy surrounding these threatening messages. The threats were condemned by many, including the state’s chief minister.

To many Kashmiris, both the fatwa and the arrests by the government are unnecessary. Some say that the controversy erupted after the state’s chief minister, Omar Abdullah, got involved by expressing his support for the band on Twitter and then calling for investigation against those writing the threatening messages.

“Nobody here had a problem with the rock band,” said Aala Fazili, a doctorate student at Kashmir University, pointing out that the band’s performance in December had not led to any protests or physical threats against them.

Mr. Fazili, 32, added that people shouldn’t be arrested for writing abusive posts on Facebook. “You cannot call an abuse a threat,” he said.

Mr. Pandita, the Kashmir police spokesman, said the investigators were making a distinction between a threat and abuse on the basis of “gravity.”

Pranesh Prakash, from the Center for Internet and Society in Bangalore, asked whether people who hold protests calling for the death of the author Salman Rushdie should also be arrested for making threats.

“I would hold that no expression of violent thoughts, online or offline, should be made criminal, even if it is repugnantly misogynistic, unless it takes the form of a credible threat that causes harm, or is harassment that constitutes harm,” he said.

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Super Bowl blackout traced to preventive equipment

NEW ORLEANS (AP) — An electrical device that had been installed expressly to prevent a power outage caused the Super Bowl blackout, the stadium's power company said Friday as it took the blame for the outage that brought the game to a halt for more than a half-hour.

Officials of Entergy New Orleans, a subsidiary of New Orleans-based Entergy Corp., said the device, called a relay, had been installed in switching gear to protect the Superdome from a cable failure between the company's incoming power line and lines that run into the stadium.

The switching gear is housed in a building known as "the vault" near the stadium that receives a line directly from a nearby Entergy power substation. Once the line reaches the vault, it splits into two cables that go into the Superdome.

Company officials said the device performed with no problems during January's Sugar Bowl and other earlier events, but has been removed and will be replaced. All systems at the Superdome are now working and the dome will host a major Mardi Gras event Saturday night, said Doug Thornton, an executive with SMG, the company that manages the stadium for the state.

The power failure at Sunday's big game cut lights to about half of the stadium for 34 minutes, halting play between the Baltimore Ravens and San Francisco 49ers.

The FBI had ruled out cyberterrorism as a cause.

Entergy's announcement came shortly before officials appeared before a committee of the City Council, which is the regulatory body for the company, to answer questions about the outage.

Entergy New Orleans CEO Charles Rice and Dennis Dawsey, an Entergy vice president for distribution, told the Council that SMG agrees the cause of the outage was a relay failure. Asked if the two corporations still plan to hire a third-party investigator, Rice said that possibility remains open.

Committee member Jackie Clarkson pressed for such an independent probe. "We've told the public we're going to have an outside investigation," she said.

"We'll work closely with SMG and if there is a need for a third-party investigation, we will do that," Rice said.

It remains unclear whether the problem with the relay was a design flaw or a manufacturing problem. Rice said Entergy is working with the manufacturer.

"I'm pleased that we were able to find the root cause," Thornton said.

Shabab Mehraeen, an assistant professor of electrical engineering at Louisiana State University, said the relay device is a common electrical fixture in businesses and massive facilities such as the Superdome.

"They are designed to keep a problem they sense from becoming something bigger, like a fire or catastrophic event," said Mehraeen, who holds a doctorate from the Missouri University of Science and Technology in Rolla, Mo.

The devices vary in size, and while Mehraeen noted he was not familiar with the specifics of the relay at the Superdome, he added, "I wouldn't be surprised if it was bigger than a truck."

Mehraeen said the reasons the devices fail are the subject of much academic research into the interaction of relays with the complex electrical systems they regulate.

"It's not unusual for them to have problems," he said. "They can be unpredictable despite national testing standards recommended by manufacturers."

Entergy and SMG had both upgraded lines and equipment in the months leading up to the Super Bowl. Rice said the new switching gear, with the faulty relay, was installed as part of a $4.2 million upgrade by Entergy, including the installation of a new power line dedicated solely to the stadium.

In a separate project, SMG replaced lines coming into the stadium after managers expressed concerns the Superdome might be vulnerable to a power failure like the one that struck Candlestick Park during a 49ers Monday Night Football game in 2011. That outage was blamed at least partly on a transformer explosion.

Thornton stressed Friday that the dome was drawing only about two-thirds of its power capacity Super Bowl night, and said typical NFL games in late August or September can draw a little more.

City officials had worried that the Super Bowl outage might harm New Orleans' chances of getting another NFL championship game.

But NFL Commissioner Roger Goodell downplayed that possibility after the outage, saying the NFL planned to keep New Orleans in its Super Bowl plans. Mayor Mitch Landrieu said the city intends to bid for the Super Bowl in 2018.

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The New Old Age: The Executor's Assistant

I’m serving as executor for my father’s estate, a role few of us are prepared for until we’re playing it, so I was grateful when the mail brought “The American Bar Association Guide to Wills and Estates” — the fourth edition of a handbook the A.B.A. began publishing in 1995.

This is a legal universe, I’m learning, in which every step — even with a small, simple estate that owes no taxes and includes no real estate or trusts — turns out to be at least 30 percent more complicated than expected.

If my dad had been wealthy or owned a business, or if we faced a challenge to his will, I would have turned the whole matter over to an estate lawyer by now. But even then, it would be helpful to know what the lawyer was talking about. The A.B.A. guide would help.

Written with surprising clarity (hey, they’re lawyers), it maps out all kinds of questions and decisions to consider and explains the many ways to leave property to one’s heirs. Updated from the third edition in 2009, the guide not only talks taxes and trusts, but also offers counsel for same-sex couples and unconventional families.

If you want to permit your second husband to live in the family home until he dies, but then guarantee that the house reverts to the children of your first marriage, the guide tells you how a “life estate” works. It explains what is taxable and what isn’t, and discusses how to choose executors and trustees. It lists lots of resources and concludes with an estate-planning checklist.

In general, the A.B.A. intends its guide for the person trying to put his or her affairs in order, more than for family members trying to figure out how to proceed after someone has died. But many of us will play both these parts at some point (and if you are already an executor, or have been, please tell us how that has gone, and mention your state). We’ll need this information.

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Paula Span is the author of “When the Time Comes: Families With Aging Parents Share Their Struggles and Solutions.”

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Media Decoder Blog: Macmillan Settles With Justice Department on E-book Pricing

11:58 a.m. | Updated Macmillan said on Friday that it had agreed to settle a lawsuit brought by the Department of Justice over the pricing of e-books, asserting that the potential costs of continuing to fight the action were too high.

The agreement means that all five major publishing houses have settled the charges brought by the government last spring.

Apple, which is also a defendant, will continue to trial in June, according to the Department of Justice. A company spokeswoman declined to comment on Friday.

In a letter addressed to authors, illustrators and agents, Macmillan’s chief executive, John Sargent, said that the risks were too great to go it alone.
“Our company is not large enough to risk a worst case judgment,” he said. “In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.”

In a suit filed last April, the Justice Department accused the publishers and Apple of conspiring in e-mails and over lavish dinners to set the price of e-books at an artificially high level. The publishers had moved from a wholesale pricing model, which allowed retailers to charge what they wanted, to a system that allowed publishers to begin setting their own e-book prices, a model known as “agency pricing.”

The defendants said they were trying to protect themselves from Amazon, which was pricing e-books below their actual cost, putting financial pressure on the publishers that they said would drive them out of business.

Nevertheless, three publishing houses, HarperCollins, Simon & Schuster and Hachette, settled with the government immediately. Penguin, Macmillan and Apple decided to fight the charges. But in December, to clear the way for its merger with Random House, Penguin settled too.

The terms of the Macmillan settlement mirrors that agreed to by the other publishers. Macmillan will immediately lift restrictions it has imposed on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions. The publisher must also notify the government in advance about any e-book ventures it plans with other publishers.

Macmillan had been holding firm that it wouldn’t settle, and analysts offered varying explanations for the sudden turnabout. James McQuivey, an analyst for Forrester Research, said that potential merger talks might be one motivation. The publishing industry has begun to consolidate to respond to the threat from Amazon, and when Penguin and Random House announced last October that they would merge, it fueled speculation that more alliances would follow.

“This was a fight not worth fighting in the first place,” Mr. McQuivey said of the lawsuit, “and given the likely nature of merger conversations behind the scenes, that’s where you finally decide the litigation is an obstacle to those talks, which are much more important.”

But Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a publishing consultant, downplayed the role of a potential merger. “There have been no rumors and no signs that Macmillan is merging,” he said. “I would actually take their statement at face value.”

He said he thought it was more likely that Macmillan realized that their stand on pricing was having no effect on the market. E-book prices have been declining steadily but not precipitously since the settlement with the first three publishers went into effect last September. “Their settling doesn’t change the overall market, and it looks much more that way to them now than when they were originally fighting,” Mr. Shatzkin said.

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IHT Rendezvous: Stark Numbers Reveal the Scale of Elephant Killings

HONG KONG — The past couple of years has seen a stream of news about elephant killings and increasingly massive ivory seizures, a stream so relentless that it has become numbing.

A study released on Wednesday, however, still has the power to shock. Over the past eight years or so, according to the study, 11,000 elephants have been killed by poachers in the western African state of Gabon, where the Minkébé National Park once held the continent’s largest forest elephant population. Two-thirds of the park’s elephant population has been wiped out since 2004.

“The situation is out of control. We are witnessing the systematic slaughter of the world’s largest land mammal,” said Bas Huijbregts, head of the Central African strand of WWF’s global campaign against illegal wildlife trade, Wildlife Conservation Society, which conducted the study with the WWF and the Gabonese National Parks Agency, said the data represented trends across all remaining forest elephant strongholds in the region, and pointed to a “regional crisis.”

The Democratic Republic of the Congo, in central Africa, is believed to have between 7,000 and 10,000 elephants — less than 10 percent of its population 20 years ago.

In the Central African Republic, which had as many as 80,000 elephants in the mid-1980s, the numbers are now down to just a few thousand as poachers are taking advantage of the political instability in the country to hunt the creatures.

And last year, hundreds of elephants were killed for their tusks in Cameroon, another western African nation.

Moreover, the Gabon slaughter has taken place in a country that had been thought to be less badly hit by poaching than other parts of Africa.

As my colleague Jeffrey Gettleman reported last year, Gabon’s government, blessed with billions of dollars of oil money, has made many of the right moves to protect its animals, setting aside chunks of land for national parks, and even lighting a pyramid of 10,000 pounds of ivory on fire to make the point that the trade was reprehensible.

As I wrote last year, demand for ivory from China is the leading driver behind the illegal trade, compounded by improved transport, trade links and a rise in the presence of Chinese nationals in Africa. And although the Chinese authorities are helping with awareness campaigns, what is really needed is on-the-ground enforcement, to help trace and combat the activities of Chinese middlemen in the illicit trade, experts have said.

For the crisis to be comprehensively addressed, Mr. Huijbregts of the WWF commented Wednesday, “the international intelligence community needs to get involved in this fight as soon as possible, in order to identify, track and put out of business these global criminal networks, which corrupt governments, erode national security and hamper economic development prospects.”

Unless the governments of the region and demand countries treat this issue as an international emergency, he said, “we cannot rule out that, in our lifetime, there will no longer be any viable elephant populations in Central Africa.”

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NFL reinstates Williams, Titans add him to staff

NASHVILLE, Tenn. (AP) — The NFL has reinstated Gregg Williams after suspending him for his role in the New Orleans' bounty scandal, and the Titans have added him to their coaching staff.

The NFL ended Williams' indefinite suspension Thursday and approved the Titans' contract hiring Williams. Tennessee also announced in the same release that Williams had been hired as a senior assistant coach for its defense.

The league issued a statement saying that Commissioner Roger Goodell cited several reasons for reinstating Williams including that Williams accepted responsibility for his role in the bounty program, his commitment to never be involved in any pay for performance system and pledging to teach safe play and respect for the rules.

"The commissioner emphasized that Williams must fully conform to league rules and will be subject to periodic monitoring to confirm his compliance," the NFL said in its statement.

Williams, suspended indefinitely last March, is the last person involved in the scandal to be reinstated by league. New Orleans coach Sean Payton had his suspension lifted on Jan. 22.

Saints general manager Mickey Loomis was suspended for eight games and assistant head coach Joe Vitt for six. Four current or former Saints players were also suspended after an investigation found the club had a performance pool offering cash rewards for key plays, including big hits. The player suspensions eventually were overturned.

Williams coached for the Saints between 2009 and 2011 and was hired as defensive coordinator by the St. Louis Rams in January 2012 before being suspended. Williams had been free to look for a new job in the NFL since the playoffs started, and now he is returning to the team where he got his start in the league back in 1990.

The Titans scheduled a news conference for Thursday afternoon with Williams expected to be on hand along with Titans coach Mike Munchak.

"I have known Gregg for over two decades and have seen him work his way up from a quality control coach to a head coach," Munchak said in a statement. "He will bring a great deal of defensive knowledge and energy to our staff. The decision to bring him here only came after going through a thoughtful and thorough process."

How well this move works remains to be seen, but Munchak faces a must-win situation going into his third season as head coach.

The Titans missed the playoffs in his first season on a tiebreaker in 2011 before slumping to a 6-10 record in 2012. Fans have not been happy that Munchak has kept Jerry Gray as his coordinator after a season when Tennessee set a franchise record by allowing 471 points, gave up at least 30 points in seven different games and ranked 27th in yards allowed.

Munchak previously made only one move on his defensive staff, firing linebackers coach Frank Bush and moving Chet Parlavecchio from assisting with special teams to linebackers coach.

Williams will be working with Gray, the same man he took with him to Buffalo when he was hired as the Bills head coach in 2001 after four seasons as Tennessee's defensive coordinator under then-coach Jeff Fisher. Gray also worked with Williams at the Washington Redskins between 2004-07 before Williams worked with the Jacksonville Jaguars in 2008 and then with the Saints.

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Well: Expressing the Inexpressible

When Kyle Potvin learned she had breast cancer at the age of 41, she tracked the details of her illness and treatment in a journal. But when it came to grappling with issues of mortality, fear and hope, she found that her best outlet was poetry.

How I feared chemo, afraid
It would change me.
It did.
Something dissolved inside me.
Tears began a slow drip;
I cried at the news story
Of a lost boy found in the woods …
At the surprising beauty
Of a bright leaf falling
Like the last strand of hair from my head

Ms. Potvin, now 47 and living in Derry, N.H., recently published “Sound Travels on Water” (Finishing Line Press), a collection of poems about her experience with cancer. And she has organized the Prickly Pear Poetry Project, a series of workshops for cancer patients.

“The creative process can be really healing,” Ms. Potvin said in an interview. “Loss, mortality and even hopefulness were on my mind, and I found that through writing poetry I was able to express some of those concepts in a way that helped me process what I was thinking.”

In April, the National Association for Poetry Therapy, whose members include both medical doctors and therapists, is to hold a conference in Chicago with sessions on using poetry to manage pain and to help adolescents cope with bullying. And this spring, Tasora Books will publish “The Cancer Poetry Project 2,” an anthology of poems written by patients and their loved ones.

Dr. Rafael Campo, an associate professor of medicine at Harvard, says he uses poetry in his practice, offering therapy groups and including poems with the medical forms and educational materials he gives his patients.

“It’s always striking to me how they want to talk about the poems the next time we meet and not the other stuff I give them,” he said. “It’s such a visceral mode of expression. When our bodies betray us in such a profound way, it can be all the more powerful for patients to really use the rhythms of poetry to make sense of what is happening in their bodies.”

On return visits, Dr. Campo’s patients often begin by discussing a poem he gave them — for example, “At the Cancer Clinic,” by Ted Kooser, from his collection “Delights & Shadows” (Copper Canyon Press, 2004), about a nurse holding the door for a slow-moving patient.

How patient she is in the crisp white sails
of her clothes. The sick woman
peers from under her funny knit cap
to watch each foot swing scuffing forward
and take its turn under her weight.
There is no restlessness or impatience
or anger anywhere in sight. Grace
fills the clean mold of this moment
and all the shuffling magazines grow still.

In Ms. Potvin’s case, poems related to her illness were often spurred by mundane moments, like seeing a neighbor out for a nightly walk. Here is “Tumor”:

My neighbor walks
For miles each night.
A mantra drives her, I imagine
As my boys’ chant did
The summer of my own illness:
“Push, Mommy, push.”
Urging me to wind my sore feet
Winch-like on a rented bike
To inch us home.
I couldn’t stop;
Couldn’t leave us
Miles from the end.

Karin Miller, 48, of Minneapolis, turned to poetry 15 years ago when her husband developed testicular cancer at the same time she was pregnant with their first child.

Her husband has since recovered, and Ms. Miller has reviewed thousands of poems by cancer patients and their loved ones to create the “Cancer Poetry Project” anthologies. One poem is “Hymn to a Lost Breast,” by Bonnie Maurer.

Oh let it fly
let it fling
let it flip like a pancake in the air
let it sing: what is the song
of one breast flapping?

Another is “Barn Wish” by Kim Knedler Hewett.

I sit where you can’t see me
Listening to the rustle of papers and pills in the other room,
Wondering if you can hear them.
Let’s go back to the barn, I whisper.
Let’s turn on the TV and watch the Bengals lose.
Let’s eat Bill’s Doughnuts and drink Pepsi.
Anything but this.

Ms. Miller has asked many of her poets to explain why they find poetry healing. “They say it’s the thing that lets them get to the core of how they are feeling,” she said. “It’s the simplicity of poetry, the bare bones of it, that helps them deal with their fears.”

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Have you written a poem about cancer? Please share them with us in the comments section below.

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Retailers' Sales Beat Forecasts, but Worries Remain

(Reuters) - Many top retailers reported strong January sales on Thursday after offering merchandise and deals that drew in shoppers in spite of higher payroll taxes.

But shares of many retailers fell as investors worried that the sales owed too much to margin-sapping discounts and that the tax hit to take-home pay would hurt spending in coming months.

Macy's Inc, whose shares rose 0.4 percent, was an exception. Its sales at stores open at least a year jumped 11.7 percent, in part because it got new merchandise into stores quickly. The results easily beat Wall Street forecasts, and the department store chain raised its profit forecast.

In contrast, Kohl's Corp, reported a 13.3 percent jump, but that came in large part from clearing out merchandise at a discount ahead of spring. The department store operator left its profit outlook unchanged, and its shares fell 1.8 percent.

"January sales don't give you much of a sense what's coming," said Dan Hess, chief executive of Merchant Forecast, which provides financial research on the retail sector. "How much of it was clearance; how much of it was new merchandise?"

Besides Macy's, low-priced retailers TJX Cos Inc and Ross Stores Inc as well as teen chain Zumiez Inc raised their outlooks. Department store operator Stage Stores Inc, said it would hit or beat the high end of its earlier estimate.

Overall, same-store sales rose 5 percent in January across 20 retailers, according to Thomson Reuters I/B/E/S. That was above both analysts' estimates of a 3.1 percent increase and the year-earlier 2.8 percent gain.

Gap Inc's sales came in slightly above Wall Street forecasts, as the company's affordable Old Navy chain offered colored denims, coats and dresses that were a hit with shoppers. But Janney Capital Markets said in a note that investors would view Gap's modest profit estimate for the fourth quarter ended on February 2 as "not good enough." The company's shares were down 4.5 percent.

Costco Wholesale Corp, Target Corp and Victoria's Secret parent Limited Brands Inc also reported stronger-than-expected January sales.

Analysts said a number of factors gave January an artificial boost: Unusually cold weather mid-month in big parts of the country helped clear out winter merchandise, and a long weekend before New Year's Day helped. January is also a low-volume month, so the numbers are less important than, say, those for November and December.

The International Council of Shopping Centers said it expects February same-store sales to rise 2.8 percent to 3 percent.

The Standard & Poor's Retail Index was down 1 percent in midday trading, compared with a 0.8 percent decline for the broad S&P 500.

LITTLE TAX EFFECT, SO FAR

The mood of U.S. consumers improved in January after a deal in Washington at the start of the month averted the country going over the "fiscal cliff" that could have raised taxes significantly, a survey released last week showed.

At the same time, the take-home pay of millions of Americans fell in January because of a 2-percentage-point increase in payroll taxes.

That higher tax could pinch shoppers in coming months as relief about the "fiscal cliff" gives way to the reality of smaller paychecks.

"The amount of money that is being taken out (from the tax increase) is a real amount of money, and you may see more paycheck-to-paycheck cycles," said Kurt Kendall, a retail strategist at consulting firm Kurt Salmon.

Cato Corp, a specialty retailer offering low-price fashion, reported a 12 percent drop in same-store sales and pinned part of the blame on the payroll tax.

Target CEO Gregg Steinhafel said in a statement that customers are showing "discipline in the face of a slow economic recovery and new pressures," including payroll tax increases.

In that environment, retailers have little room for error.

Ann Inc said the brightly colored clothes it sold at its Loft chain failed to catch on with shoppers, and its sales estimate for the fourth quarter ended on January 31 disappointed Wall Street, sending its shares down 7 percent.

Department store operator Bon-Ton Stores Inc and teen chains Buckle Inc and Wet Seal Inc also reported disappointing sales.

At the higher end, Nordstrom Inc reported an 11.4 percent jump in same-store sales, probably buoyed by a stock market run-up.

"The stock market has also helped - it frees higher-end individuals to go shopping," said David Bassuk, head of AlixPartners' global retail practice.

The same-store sales retail index offers only a glimpse of retail spending as major chains like Wal-Mart Stores Inc, Sears Holdings Corp and Best Buy Co Inc do not report monthly sales.

(Reporting by Phil Wahba in New York, and Nivedita Bhattacharjee and Jessica Wohl in Chicago; Editing by Lisa Von Ahn)

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Clashes Erupt in Damascus, Shattering Lull, as Prospects for Talks Dim

Goran Tomasevic/Reuters

A building in the Damascus suburb of Zamalka was hit by a mortar shell fired by the Syrian Army on Wednesday.

BEIRUT, Lebanon — Syrian insurgents attacked military checkpoints and other targets in parts of central Damascus on Wednesday, antigovernment activist groups reported. The fighting shattered a lull there as prospects for any talks between the antagonists appeared to dim, a week after the opposition coalition leader first proposed the surprise idea of a dialogue aimed at ending the war.

Some antigovernment activists described the resumption of fighting, which had lapsed for the past few weeks, as part of a renewed effort by rebels to seize control of central Damascus, the Syrian capital, although that depiction seemed highly exaggerated. Witness accounts said many people were going about their business, while others noted that previous rebel claims of territorial gains in Damascus had almost always turned out to be embellished or unfounded.

Representatives of the Military Council of Damascus, an insurgent group, said that at least 33 members of President Bashar al-Assad’s security forces in Damascus had surrendered, while others had fled central Al Abasiyeen Square, and that other forces had erected roadblocks on all access streets to the area to thwart the movement of rebel fighters.

Salam Mohammed, an activist in Damascus, described Al Abasiyeen Square as “on fire,” and a video clip uploaded on YouTube showed a thick column of black smoke spiraling over the area while the sound of shelling could be heard. A voice is heard saying the shelling had started a fire. The Local Coordination Committees, an anti-Assad activist network in Syria, also reported gunfire in nearby streets.

Firas al-Horani, a military council spokesman, said fighters of the Free Syrian Army, the main armed opposition group, were in control of Al Abasiyeen Square. He also said, “The capital, Damascus, is in a state of paralysis at the moment, and clashes are in full force in the streets.”

It was impossible to confirm Mr. Horani’s assertions or the extent of the fighting because of Syrian government restrictions on foreign news organizations. But Syria’s state-run media said insurgent claims of combat success in Damascus were false. “Those are miserable attempts to raise the morale of terrorists who are fleeing our valiant armed forces,” said SANA, the official news agency.

Deadly violence also was reported in the Homs Province town of Palmyra, the site of a notorious prison where Mr. Assad’s father, Hafez, ordered the summary execution of about 1,000 prisoners during an uprising against his family’s grip on power in the 1980s.

The Syrian Observatory for Human Rights, a Britain-based group with a network of contacts inside Syria, said two booby-trapped cars exploded near the military intelligence and state security branches, killing at least 12 members of the security forces and wounding more than 20. The observatory said government forces deployed throughout Palmyra afterward, engaging in gun battles with insurgents that left at least eight civilians wounded in the cross-fire.

SANA also reported an attack but said it was caused by two suicide bombers who had targeted a residential part of the town, killing an unspecified number of civilians.

The new mayhem came as discord appeared to grow within the National Coalition of Syrian Revolutionary and Opposition Forces, the umbrella anti-Assad group, over a proposal made on Jan. 30 by Sheik Ahmad Moaz al-Khatib, its leader, to engage in talks with Mr. Assad’s government aimed at ending the nearly two-year-old conflict, which has left more than 60,000 people dead. Although Sheik Khatib’s proposal contained a number of conditions, it broke a longstanding principle that Mr. Assad must relinquish power before any talks can begin.

Many of Sheik Khatib’s colleagues grudgingly agreed to go along with the proposal after it had been made, but critical voices have been rising, especially among the coalition’s more militant elements.

In a new video uploaded on YouTube, a cleric from the Nusra Front, an anti-Assad Islamist militant group that the Obama administration has classified as a terrorist organization, said in a prayer speech that brute force against Mr. Assad and his disciples was the only solution.

“We will cut their heads, we swear to kill them all, and they will see our worst war,” said the cleric, who spoke in Libyan-accented Arabic at a mosque in the contested northern city of Aleppo, holding a sword in his right hand. “No for the negotiations, no for the talks, no retreat in a jihad for God’s sake.”

Hania Mourtada reported from Beirut, and Rick Gladstone from New York. Karam Shoumali contributed reporting from Antakya, Turkey.

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