Wall St Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in the past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

This week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. EST on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, on Friday registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

If tax rates are going up, an investor would sell now to book gains and pay lower capital gains taxes, according to Aama. But if an investor has capital losses, then "you take losses and have them count against capital gains or regular income if you do not have any offsetting capital gains.

"In essence, higher capital gains tax rates will give your losses a higher value next year than this year as the income tax shield will be worth more in 2013. So if you have no capital gains this year, you are better off holding off on selling your losers in 2012 and waiting till 2013," he said in an email.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Even with stocks' recent declines, the three major U.S. stock indexes are still up for the year. The Dow Jones industrial average <.dji> is up 7.7 percent for 2012 so far, while the benchmark Standard & Poor's 500 index <.spx> is up 12.8 percent and the Nasdaq Composite Index <.ixic> is up 14.3 percent for the year to date.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there is a decent chance that the market could rally before the year ends.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Sunday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on <.l>; Pan-European stock market outlook <.eu>; Tokyo stock market outlook <.t>)

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American Doctor, Dilip Joseph, Rescued in Afghanistan

KABUL, Afghanistan — An American doctor kidnapped by the Taliban was rescued Sunday by Afghan and coalition forces in eastern Afghanistan, officials said. At least six people were killed and two Taliban leaders were arrested during the rescue.

One of the rescuers, an American man, was killed during the operation, the White House said in a brief statement on Sunday night. The statement gave no other specifics, except to describe the man as “one of our special operators.”

The American rescued on Sunday, Dr. Dilip Joseph, was abducted along with two Afghan men on Wednesday while driving to a rural medical clinic in the Sorobi district of eastern Afghanistan, about an hour outside the capital, Kabul, according to the district police chief, Naqeebullah Khan.

From there, the kidnapped men were taken to a mountainous area about 50 miles from the border with Pakistan, according to a statement from the American nonprofit organization that employed the men, Morning Star Development. After days of negotiations, the two Afghan employees were released Saturday. But Dr. Joseph remained in the hands of his Taliban captors.

Kidnappings of government officials and Westerners are a common source of money for criminal organizations as well as the Taliban. In many cases, people kidnapped by the Taliban are taken across the border to Pakistan, where it becomes extremely difficult to track them.

Having received intelligence that the doctor was in imminent danger, American and Afghan forces mounted a rescue attempt, the coalition forces said in a statement. The doctor was unhurt in the raid.

It was unclear whether there were any other casualties among the Afghan or coalition forces involved.

“Today’s mission exemplifies our unwavering commitment to defeating the Taliban,” said Gen. John R. Allen, the commander of coalition forces in Afghanistan, who ordered the mission.

Dr. Joseph, who lives in Colorado Springs, has frequently traveled to Afghanistan, according to the organization’s statement.

The abductions occurred about 25 miles from a stretch of highway heading east from the capital toward Jalalabad, Afghanistan. The highway itself is considered safe during the day, but travel is much more dangerous in the areas off the main road.

Kidnappings are frequent occurrences in the area, and the Taliban is active there, despite international efforts to control the violence. In the case of Dr. Joseph, the kidnappers were believed to have been demanding a $100,000 ransom, said Dr. Said Jan, the director of the public health clinic in Sorobi, where Dr. Joseph was seized.

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James Cameron Relives Voyage to Ocean’s Deepest Spot

SAN FRANCISCO — The first thing James Cameron saw 7 miles below the sea was man-made: tracks from a remotely operated vehicle.

“When I got to the bottom, I saw skid marks from the ROV,” Cameron said yesterday (Dec. 4) here at the annual meeting of the American Geophysical Union, referring to a 2009 survey by the Monterey Bay Aquarium Research Institute. Scientific results of the film director’s expedition to the Mariana Trench were presented at the meeting this week, and Cameron and the researchers described the highlights to a packed crowd.

Cameron reported a new, corrected depth for his landing — 35,803 feet (10,912 meters) — which beats by five feet (1.5 m) the record set by U.S. Navy Lt. Don Walsh and Jacques Piccard in 1960 at the same spot. However, “because the error [calculating the depth] on Don’s dive is much greater, we’re just going to have to call it a tie,” Cameron said.

Deepsea Challenger

Cameron’s Deepsea Challenger expedition made dives to the New Britain Trench and the Mariana Trench in the southwestern Pacific Ocean between Jan. 31 and April 3, with one manned dive by Cameron to the Mariana’s Challenger Deep, the deepest spot in any ocean.

Unusual, never-before-seen species were snared and brought back to the surface. A bizarre microbial mat community was discovered living on altered rocks in the Sirena Deep, another deep pool 6.77 miles (10.9 kilometers) below the surface.

Changes in temperature and salinity starting at 26,200 feet (8 km) deep hint at an unknown current coming into the Challenger Deep, said Doug Bartlett, a microbiology professor at the Scripps Institution of Oceanography at UC San Diego.

The filmmaker journeyed inside a high-tech lime-green machine — a steel sphere encased in foam — dubbed the Deepsea Challenger. The expedition traveled with two unmanned seafloor “landers” — large contraptions hoisted over the side of a ship and dropped to the seafloor. Once on the bottom, bait attached to the lander lured seafloor creatures to the craft, and a suite of instruments took samples, photographs and data. [Images: James Cameron's Historic Deep-Sea Dive]

The two contraptions working together proved to be a very good system, Cameron said. “We could rendezvous on the bottom and see the results of that bait running for six to eight hours, and that’s how Doug could find a new species of giant arthropod,” Cameron said.

Challenging journey

The March 26 dive proved to be a physical and mental challenge for Cameron. “I did yoga for six months so I could contort myself into the sphere,” he said.

As he sank through the water, Cameron said he “burned though my whole checklist,” designed to distract him during the long hours of the dive. “I still had 3,000 meters left to go with pretty much nothing left to do but sit quietly and think about the pressure building up around the hull,” he said.

The sub touched down gently, and Cameron immediately took a sample of the seafloor, as planned. This was a good contingency, because the sub’s hydraulic fluid line then burst, leaving him unable to collect more samples.

To his surprise, the sub’s voice communications worked perfectly. “We actually expected they wouldn’t, and I would have to default to texting,” he said. “Texting while driving is not a good thing, especially if you’re using two hands to operate seven joysticks and you’re 7 miles down.”

Cameron first drove the sub about 200 meters, finding the seafloor elevation stayed the same. In fact, Challenger Deep turned out to be remarkably flat, and the sub was easy to drive. “The vehicle was quite nimble, the sub’s yaw rate was very good,” he said. (Yaw describes the left-to-right rotation of a craft.)

A quick return

After about three hours, some of the submersible’s batteries had low charge readings, the steering was problematic, and it was time to return to the surface. The mission should have lasted five to six hours. “I hate this. I hated having to go back,” Cameron recalled thinking.

The trip to the top was mercifully short at 73 minutes. The submersible covered nearly 7 miles in a little over an hour — slow in a car, but like riding a missile for a human in a metal ball. Cameron said the surface trip is when he noticed the aches and pains from the cramped sub. “That’s when your butt is really sore, and when you notice how much it hurts.” [Infographic: James Cameron's Mariana Trench Dive]

The sub now sits in a barn in Santa Barbara, waiting for Cameron or another group with enough money to send it back to the deep ocean. He declined to say how much it cost to build and mount the expedition.

“I would love for the sub to dive again,” he said. “I personally feel that we just barely got started before we had to turn back and there’s just so much out there.”

“And if not, at the very least, the technical innovations can be incorporated into other vehicle platforms,” Cameron added. “As far as I’m concerned, it’s an open source situation.”

Reach Becky Oskin at [email protected]. Follow her on Twitter @beckyoskin. Follow OurAmazingPlanet on Twitter @OAPlanet. We’re also on Facebook and Google+.

Copyright 2012 OurAmazingPlanet, a TechMediaNetwork company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Linux/Open Source News Headlines – Yahoo! News

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Jason Aldean's Holiday Plans: Visiting Santa with His Kids

By Eileen Finan

12/08/2012 at 06:30 PM EST

Jessica Ussery and Jason Aldean

Bauer-Griffin

After a year of professional highs – and personal lows – Jason Aldean is looking forward to a quiet holiday with family.

"I'm on the road so much during the year, so what I look forward to the most is being home with my family, " he told PEOPLE at the taping of the CMT Artists of the Year special (airing Saturday at 10/9 CT), where he walked the red carpet hand-in-hand with his wife, Jessica.

Aldean says being with Jessica and their daughters – Keeley, 10, and Kendyl, 5 – and doing "things like taking the girls to the mall to shop or to see Santa Claus" are on his holiday must-do list. "Things that simple to me are really cool."

Looking back at 2012, some highlights for the country star include releasing a chart-topping album and playing sold out stadiums.

But Aldean also faced personal hurdles when photos surfaced showing him getting affectionate with another woman. Still, for the singer, who publicly apologized for his behavior, life is good.

"This year, the tour went really well, the album has done really well, and good stuff has definitely outweighed the bad," he says. "All that other stuff is kind of in the past and we're just looking to have a great year in 2013."

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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Wall Street Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in this past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on .L/O; Pan-European stock market outlook .EU/O; Tokyo stock market outlook .T/O; Wall St Week Ahead runs every Friday.)

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Italian Prime Minister Mario Monti to Resign

ROME — Prime Minister Mario Monti said he intended to resign after losing the backing of former Prime Minister Silvio Berlusconi’s party, according to a statement issued late Saturday by the president’s office.

Mr. Monti said that he would first try to muster the votes needed to pass a budget for 2013 but that the withdrawal of support last week by Mr. Berlusconi’s People of Liberty party represented a “categorical motion of no confidence in the government,” according to the statement.

Only hours earlier, Mr. Berlusconi said that he was ready to run for office again, promising to bring the change Italy needed.

During a two-hour meeting on Saturday evening, Mr. Monti told President Giorgio Napolitano that he would make an effort in Parliament to pass the budget and a financial stability law to try to defer “the consequences of a government crisis” before handing in his “irrevocable resignation,” the statement said.

A year ago, Mr. Monti was asked to form a government after the resignation of Mr. Berlusconi, who left office amid personal and political turmoil. With Italy on the brink of financial dissolution, Mr. Monti’s government of technocrats proposed a series of structural changes to put the country on a more fiscally responsible path.

Though some measures have fallen short of that aim, and have largely failed to stimulate economic growth, Mr. Monti has been widely credited with bolstering Italy’s standing with global financial markets.

As the European Union pressed Italy to enact changes to lower its public debt and streamline its pension system and costly labor market, Mr. Monti counted on multiparty support for his policies. Last week, however, Mr. Berlusconi’s party distanced itself from the government’s economic policies.

Mr. Berlusconi, 76, who dominated Italian politics for nearly two decades, said that his party had been unable to find a credible successor, and so the task of commanding the party had once again fallen to him.

“To win you need an acknowledged leader,” he told reporters outside the training facilities of his soccer team, A. C. Milan. “It’s not as though we didn’t look for this leader, we did, and how, but there isn’t one, and so...” he said, his voice trailing off before he laughed.

Though he is unlikely to win an election, Mr. Berlusconi could still get enough votes to hold some sway in Parliament. He said Saturday that the country was worse off today than when he left office.

Italian newspapers on Saturday hypothesized that elections would be held in March.

In an entry on his Facebook page on Saturday, Mr. Berlusconi, who was convicted of tax fraud in October and is standing trial in Milan on charges of paying for sex with an underage girl, said he did not miss being prime minister. “I return with desperation to public office, and I do it once again out of a sense of responsibility,” he wrote.

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The Era of Twitter Without Instagram Has Now Begun

We know everyone is a little bummed about all those filtered photos disappearing from your Twitter streams this weekend, but let’s not get all worked up about it: They are disappearing, and there is no scandal.

RELATED: Why You Can’t See Instagram Photos on Twitter Anymore

TechCrunch’s  Drew Olanoff got a little too excited on Friday and thought a single in-stream photo meant that Instagram was allowing its Twitter cards back on Twitter and thought the two services were planning a sudden reunion. You may have seen some, too, but a Facebook spokesperson assured users these Instagram photos on Twitter were the last holdouts in the switchover. ”What you are seeing now may be some sort of regression depending on the mobile client, but we’re checking in with the engineers,” read Facebook’s statement, via Talking Points Memo’s Carl Franzen.

RELATED: How to Get Over the Twitter-Instagram War on Photos

Which means the end of this particular social-media marriage is upon us. Despite the immediate user backlash, Instagram CEO Kevin Systrom has made it pretty clear that the photo-sharing app doesn’t plan on making nice with Twitter. In case you hadn’t accepted the reality of Silicon Valley competition the first time around, this photo-friendly weekend might be the time to check out our handy three-step guide to getting over it. 

Social Media News Headlines – Yahoo! News

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Alicia Keys (Almost) Gets Auctioned Off in N.Y.C.

Caught in the Act

12/07/2012 at 06:35 PM EST

Jennifer Hudson and Alicia Keys at the Black Ball "REDUX"

Stephen Lovekin/Child12/Wireimage

Alicia Keys was definitely on fire Thursday night.

The Grammy-winning singer hosted, performed – and was nearly auctioned off – at the Black Ball "REDUX," an annual event for her organization Keep A Child Alive, which assists those affected by AIDS in Africa, held at New York's legendary Apollo Theatre. The event, which was rescheduled due to Hurricane Sandy, honored Oprah Winfrey for her work in Africa and India and raised $2.9 million.

Keys took to the red carpet in a floor-length, form-fitting Alaia gown and could hardly control her excitement over her new album Girl on Fire, which debuted at No. 1 on the Billboard charts this week. "It's a joy that I can't even express," the singer said of her fifth chart-topping album.

And she was just as enthused over the recent Grammy nominations announced this week. Asked who she's rooting for, Keys started singing R&B star Frank Ocean's hit single "Thinking About You." "I'm so excited for him!" she said.

Padma Lakshmi, Bonnie Raitt, Gayle King and Keys's husband Swizz Beatz also hit the carpet before heading inside for the show, where guests dined on Moroccan lamb chops and steak tartare taquitos, crafted by celebrity chef Marcus Samuelsson.

Before taking the stage with Jennifer Hudson and Raitt, Keys gave the award to Winfrey, who had never been to the famous Harlem theatre. But it was during the auction, hosted by Whoopi Goldberg, that the singer got an offer she had to refuse.

One wealthy guest said he'd up his bid from $100,000 to $250,000 for a trip to South Africa – if Keys would join him and his friends. "I'll go for a little more," Keys quipped. – Janine Rayford

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

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Johnson can be reached at https://twitter.com/GeneAPseattle

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