Lebanese militants fire rockets at Israel

Israel potentially faces second front; military operations halted for 3 hours

Mahmud Hams / AFP - Getty Images

Palestinians gather around a destroyed mosque after an Israeli airstrike overnight in Gaza City on Thursday.

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JERUSALEM - Lebanese militants fired at least three rockets into Israel early Thursday, threatening to open a new front for the Jewish state as it pushed forward with a bloody offensive in the Gaza Strip that has killed nearly 700 people.

Two people were lightly injured, and the rockets that exploded in Israel's north raised the specter of renewed hostilities with Hezbollah, just 2 1/2 years after Israel battled the guerrilla group to a 34-day stalemate. Hezbollah started the 2006 war as Israel was battling Palestinian militants in Gaza.

No group claimed responsibility and Lebanon's government, wary of conflict, quickly condemned the rocket fire. Israel fired mortar shells into southern Lebanon in response.

For a second straight day, Israel said it suspended is Gaza military operation for three hours to allow in humanitarian supplies.

Before the lull on Thursday, Israel killed at least eight people in Gaza, including five militants, raising the death toll from its 13-day offensive to 696 people, according to Palestinian medical officials. The offensive is meant to halt years of Palestinian rocket attacks on southern Israel, but with roughly half the dead believed to be civilians, international efforts to broker a cease-fire have been gaining steam.

Retirement home hit
One of the Lebanese rockets went through the roof of a retirement home in Nahariya, about five miles from the border, and exploded in the kitchen as some 25 residents were eating breakfast in the adjacent dining hall. One resident suffered a broken leg, another bruises, apparently from slipping on the floor after emergency sprinklers came on.

"The rocket entered through the roof, hurling the water heaters into the air. It went through bedrooms upstairs and then into the kitchen. There was a serious blast," said Henry Carmelli, the home's manager.

About three hours later, air-raid sirens went off again. Residents in two northern towns reported explosions of incoming rockets, though some reports suggested there had been a false alarm. Police said they were searching for the fallen projectiles.

Israel has repeatedly said it was prepared for a possible attack on the north since it launched its bruising campaign against Hamas militants in Gaza on Dec. 27. Israel has mobilized thousands of reserve troops for such a scenario, and leaders have warned Hezbollah of dire consequences if it enters the fighting.

Lebanese Prime Minister Fuad Saniora condemned both the attacks and Israel's retaliatory fire. The attacks are "the work of parties who stand to lose from the continued stability in Lebanon," Saniora said.

Omer Messinger / AFP - Getty Images An Israeli woman walks in the damaged kitchen of a nursing home after a rocket fired from Lebanon hit the Israeli town of Nahariya on Thursday.

Hezbollah, which did not comment, has said it does not want to draw Lebanon into a new war. Small Palestinian groups, who have rocketed Israel twice since the end of the 2006 war, have recently threatened to open a new front against Israel if the fighting in Gaza continued.

An Israeli Cabinet minister, Meir Sheetrit, suggested that Lebanese splinter groups, not Hezbollah, were responsible. He said the government had no interest in renewing hostilities.

"Even though we have the ability to respond with great force, the response needs to be carefully considered and responsible," Sheetrit told Army Radio. "We don't need to play into their hands."

Shortly after the first rockets fell around the town of Nahariya, five miles south of the Lebanese border, Lebanese TV stations reported Israeli mortar fire on open areas in southern Lebanon. The Israeli military confirmed it carried out "pinpoint fire" in response without elaborating.

Show of solidarity?
Israeli defense commentators said they expected the rocket fire to be a one-time show of solidarity with the Palestinians, not a declaration of war. Still, police said public bomb shelters throughout the north were opened.

Palestinians reported some two dozen airstrikes in Gaza on Thursday. One militant was killed and 10 wounded in Gaza City, while an airstrike in northern Gaza killed three members of a rocket-launching cell, Palestinian medical officials said. The attack took place about 150 yards from a hospital and wounded 12 bystanders. The Israeli army has repeatedly said militants use civilian areas for cover.

Also, there were clashes between Israeli armored forces and Hamas militants in southern Gaza.

The Israeli offensive has reduced Palestinian rocket fire, but not stopped it altogether. Several barrages were reported Thursday, including one strike that damaged a school and sports center in the southern city of Ashkelon, police said. Both buildings were empty.

Wall Street treads cautiously, awaiting data

Dismal retail sales numbers already setting tone for the session

NEW YORK - Wall Street headed for a sharply lower open Thursday as investors absorbed bad news from Wal-Mart Stores Inc., which signaled that even the stronger U.S. retailers are struggling.

The largest U.S. retailer said sales in December at stores open for at least a year rose by 1.7 percent after stripping out fuel, worse than analysts' estimates. Wal-Mart also slashed its forecast for fourth-quarter earnings, and its shares fell in premarket trading.

Consumers have been cutting back spending as the job market deteriorates. According to the median estimate of economists surveyed by Thomson Reuters/IFR, the Labor Department is expected to report Thursday that the number of new claims for jobless benefits jumped last week to 540,000 from 492,000 in the previous week.

As readings on the job market and consumer spending worsen, most on Wall Street are hoping that a stimulus package proposed by President-elect Barack Obama will get congressional approval. Obama said Thursday the nation's recession could "linger for years" unless Congress acts, according to the text of a speech to be delivered at George Mason University in Fairfax, Virginia.

Ahead of the market's open, Dow Jones industrial average futures fell 114, or 1.30 percent, to 8,630. Standard & Poor's 500 index futures fell 11.20, or 1.24 percent, to 894.00, but Nasdaq 100 index futures fell 6.00, or 0.48 percent, to 1,233.50.

In tech sector news, computer maker Dell Inc. said it would slash 1,900 jobs in Ireland, while Lenovo Group, another computer maker, warned it expects a loss for its latest quarter and will lay off 2,500, or 11 percent, of its work force worldwide.

On Wednesday, the Dow fell 245 points on worries about unemployment and a warning from technology giant Intel Corp. about poor business conditions.

Government bond prices rose modestly in premarket trading Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.47 percent from 2.50 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.11 percent.

The dollar was mixed against other major currencies, while gold prices fell.

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Dismal retail sales in December

Britain's FTSE 100 was down 1.89 percent in afternoon trading, as the Bank of England cut its official interest rate by half a percentage point to 1.5 percent — the lowest level in its 315-year history. The Fed last month slashed rates to a record-low range of zero to 0.25 percent.

In other European trading, Germany's DAX index fell 1.69 percent, and France's CAC-40 fell 2.10 percent. In Asian trading, Japan's Nikkei stock average fell 3.93 percent, and Hong Kong's Hang Seng index fell 3.81 percent.

Crude oil prices fell 2 cents to $42.61 a barrel in premarket electronic trading on the New York Mercantile Exchange.

TOP 10 Market movers NYSE • Most Active • Top % Gainers • Top % Decliners NASDAQ • Most Active • Top % Gainers • Top % Decliners AMEX • Most Active • Top % Gainers • Top % Decliners Name Volume Price Change % Change State Street Corp 0 42.22 unch 0.00% Allied Capital Corp 0 4.47 unch 0.00% Capital One Financial Corp 0 31.68 unch 0.00% Thermo Fisher Scientific Inc 0 34.92 unch 0.00% Brookfield Asset Management Inc 0 17.12 unch 0.00% Time Warner Cable Inc 2,779,323 21.56 unch 0.00% Windstream Corp 0 8.99 unch 0.00% Allergan Inc 0 40.34 unch 0.00% Comerica Inc 0 18.86 unch 0.00% Big Lots Inc 0 15.16 unch 0.00% Source: MSN Money and ComStock

Obama: Pass stimulus or recession lasts 'years'

President-elect will warn that situation could become 'dramatically worse'

WASHINGTON - President-elect Barack Obama was set to warn Thursday that the nation's recession could "linger for years" unless Congress acts to pump unprecedented sums from Washington into the U.S. economy, making his highest-profile case yet on an issue certain to define his early presidency.

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said in a speech scheduled to be delivered at George Mason University in Fairfax, Va., outside Washington. Excerpts from his prepared text were released in advance by his transition team.

"A bad situation could become dramatically worse," he added, painting a dire picture — including double-digit unemployment and $1 trillion in lost economic activity — that recalled the days of the Great Depression in the 1930s.

It was the fourth day in a row that Obama has made a pitch for a huge infusion of taxpayer dollars to revive the sinking economy.

His events have increasingly taken on the trappings and air of the presidency, with the speech — coming a full 12 days before he takes over at the White House — a particularly showy move. Presidents-elect typically stick to naming administration appointments and otherwise staying in the background during the transition period between Election Day and Inauguration Day, but Obama has clearly made the calculation that a nation anxious about its economic outlook and eager to bid farewell to the current president, George W. Bush, needs to hear from him differently and more frequently.

Indeed, the economic news is grim.

Consumers and companies are folding under the negative forces of a collapsed housing market, a global credit crunch and the worst financial crisis since the 1930s. The recession, which started in December 2007, already is the longest in a quarter-century.

A report due out the same day as Obama's speech is expected to show that the number of newly laid-off people signing up for state unemployment insurance last week rose to 540,000, up from 492,000 in the previous week. The number of people continuing to draw jobless benefits is projected to stay near 4.5 million, demonstrating the troubles the unemployed are having in finding new jobs.

'More families will lose their savings'
For all of 2008, employers probably slashed payrolls by at least 2.4 million. That's based on economists' forecasts for a net loss of 500,000 additional jobs in December, as well as the job losses previously reported. Some, however, think the number of jobs cut last month will be higher, around 600,000 or 700,000. The Labor Department will release that report Friday.

"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," Obama said. "More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

A day after the release of a stunning new estimate — that the federal budget deficit will reach an unprecedented $1.2 trillion this year, nearly three times last year's record — Obama acknowledged the new stimulus spending will "certainly add to the budget deficit." He also acknowledged some sympathy with those who "might be skeptical of this plan" because so much federal money has already been spent or committed in an attempt — largely unsuccessful so far — to get credit, the lifeblood of the American economy, flowing freely once again.

Such statements are coded to appeal to budget hawks in both parties, whom Obama wants to win over so that approval of a package draws wide, bipartisan support in the Democratic-led Congress.

To answer their concerns, he promised to allow funding only for what works. He also pledged a new level of transparency about where the money is going. A day earlier, he promised to tackle the out-of-control fiscal problem posed by Social Security and Medicare entitlement programs and named a special watchdog to clamp down on all federal programs.

Obama made broader arguments, too, saying that the private sector, typically the answer, cannot do what is needed now.

Still-evolving package
"At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe," he said.

Obama's transition team and Democratic congressional leaders are working daily to hammer out the still-evolving package, expected to total nearly $800 billion. The initial hope had been to have a new stimulus package approved by Congress in time for Obama to sign it upon taking office on Jan. 20. That timeline has slipped considerably, into at least mid-February if not later.

The package is expected to include tax cuts for businesses and middle-class workers, money to help cash-starved states with Medicaid programs and other operating costs, and a huge share for infrastructure building, investments in energy efficiency and a rebuilding of the information technology system for health care. Much of the latter portions of the plan are aimed at what Obama likes to talk about as the need for "reinvestment" and not just "recovery."

"It is not just another public works program," he said in the speech. "It's a plan that recognizes both the paradox and the promise of this moment, the fact that there are millions of Americans trying to find work even as, all around the country, there is so much work to be done."

He also promised action to address the economy's ills beyond the package, such as tackling the massive wave of home foreclosures many experts expect, preventing the failure of financial institutions, rewriting financial regulations and keeping accountable the "Wall Street wrongdoers" who engage in risky investing.