A Volatile Week Ends With Modest Gains

Stocks advanced modestly on Friday, leaving the Standard & Poor’s 500-stock index with slight gains after a volatile week, as strong economic data overshadowed growth concerns in China and Europe and let investors discount the impact of federal spending cuts.

Data reported early in the day showed that Asian factories were slowing and European output was falling, setting off a sharp drop at the beginning of trading in New York. But most of the losses evaporated after a report showed that United States manufacturing activity had expanded in February at the fastest pace in 20 months. Consumer sentiment also rose in February as Americans turned more optimistic about the job market.

As $85 billion in government budget cuts took effect on Friday, President Obama blamed Republicans for the lack of a compromise to avert the so-called sequester. But the stock market appeared to have already priced in legislators’ failure to reach an agreement.

“We were able to dig out of that hole, but not make any great strides on it either,” said Peter M. Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Ill. “We will probably be in a holding pattern pending some big development on a broader budget deal.”

The Dow Jones industrial average gained 35.17 points, or 0.25 percent, to 14,089.66. The S.& P. 500 rose 3.52 points, or 0.23 percent, to 1,518.20. The Nasdaq composite index advanced 9.55 points, or 0.3 percent, to 3,169.74.

For the week, the Dow rose 0.64 percent, the S.& P. 500 edged up 0.17 percent and the Nasdaq gained 0.25 percent.

It was a bumpy road to the week’s slight gains. The markets slid on Monday after inconclusive elections in Italy revived concerns about the euro zone, only to rebound in the next two sessions after the Federal Reserve chairman, Ben S. Bernanke, defended the central bank’s stimulus measures.

The low interest rates from the Federal Reserve’s monetary policy have helped equities continue to attract investors. The Dow is less than 1 percent away from its nominal intraday record of 14,198.10. Declines have been shallow and short-lived, with investors jumping in to buy when the market dips.

Advancing stocks outnumbered declining ones on the New York Stock Exchange by a ratio of about 17 to 13, while on the Nasdaq, about seven stocks rose for every five that fell.

Shares of Intuitive Surgical jumped 8.5 percent on Friday, to $553.40, after a Cantor Fitzgerald analyst, Jeremy Feffer, upgraded the stock, saying a slide of more than 11 percent on Thursday had been a gross overreaction to a news report.

Groupon shares surged 12.6 percent, to $5.10, a day after the company fired its chief executive in response to weak quarterly results.

Gap stock rose 2.9 percent, to $33.87, after the company reported fourth-quarter earnings that beat expectations and raised its dividend by 20 percent. Salesforce.com posted sales that beat forecasts, driving its stock up 7.6 percent, to $182.

Chesapeake Energy shares fell 2.4 percent, to $19.67, after the Securities and Exchange Commission escalated its investigation of the company and its chief executive, Aubrey McClendon, over a perk that granted him a share in each of the natural gas producer’s wells.

The benchmark 10-year Treasury note rose 10/32, to 101 13/32, and its yield fell to 1.85 percent from 1.88 percent late on Thursday.

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Army Private Admits Giving Military Files to WikiLeaks

Alex Wong/Getty Images

Private Manning pleaded guilty to 10 criminal counts in connection with the leak to WikiLeaks.

FORT MEADE, Md. — Pfc. Bradley Manning on Thursday confessed in open court to providing vast archives of military and diplomatic files to the antisecrecy group WikiLeaks, saying that he wanted the information to become public because more openness could “spark a debate about foreign policy” that he hoped would “make the world a better place.”

Appearing before a military judge for more than an hour, Private Manning read a statement recounting how he joined the military, became an intelligence analyst in Iraq, decided that certain files should become known to the American public to prompt a wider debate about foreign policy, downloaded them from a secure computer network and then ultimately uploaded them to WikiLeaks.

“No one associated with WLO” — an abbreviation he used to refer to the WikiLeaks organization — “pressured me into sending any more information,” Private Manning said. “I take full responsibility.”

Before reading the statement, Private Manning pleaded guilty to 10 criminal counts in connection with the huge amount of material he leaked, which included videos of airstrikes in Iraq and Afghanistan in which civilians were killed, logs of military incident reports, assessment files of detainees held at Guantánamo Bay, Cuba, and a quarter-million cables from American diplomats stationed around the world.

The guilty pleas exposed him to up to 20 years in prison. But the case against the slightly built 25-year-old, who has become a folk hero among antiwar and whistle-blower advocacy groups, is not over. The military has charged him with a far more serious set of offenses, including aiding the enemy and multiple counts of violating federal statutes, including the Espionage Act. Prosecutors now have the option of pressing forward with proving the remaining elements of the more serious charges.

That would involve focusing only on questions like whether the information he provided counted as the sort covered by the Espionage Act — that is, whether it was not just confidential but also could be used to injure the United States or aid a foreign nation.

Private Manning described himself as thinking carefully about the kind of information he was releasing, and taking care to make sure that none of it could cause harm if disclosed.

The only material that initially gave him pause, he said, were the diplomatic cables, which he portrayed as documenting “back-room deals and seemingly criminal activity.”

But he decided to go forward after discovering that the most sensitive cables were not in the database. He was also motivated, he said, by a book about “open diplomacy” after World War I and “how the world would be a better place if states would not make secret deals with each other.”

“I believed the public release of these cables would not damage the United States,” he said. “However, I did believe the release of the cables might be embarrassing.”

Private Manning said that the first set of documents he decided to release consisted of hundreds of thousands of military incident reports from Afghanistan and Iraq. He had downloaded them onto a disk because the network connection at his base in Iraq kept failing, and he and his colleagues needed regular access to them.

Those reports added up to a history of the “day-to-day reality” in both war zones that he believed showed the flaws in the counterinsurgency policy the United States was then pursuing. The military, he said, was “obsessed with capturing or killing” people on a list, while ignoring the impact of its operations on ordinary people.

Private Manning said he put the files on a digital storage card for his camera and took it home with him on a leave in early 2010. He then decided to give the files to a newspaper.

“I believed if the public — in particular the American public — had access to the information” in the reports, “this could spark a debate about foreign policy in relation to Iraq and Afghanistan,” he said.

Scott Shane contributed reporting.

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'Girls Gone Wild' files for bankruptcy over debts

LOS ANGELES (AP) — The company behind the "Girls Gone Wild" video empire has filed for bankruptcy in a move it says is an effort to restructure its legal affairs after several disputed court judgments.

GGW Brands LLC and several subsidiaries filed for Chapter 11 bankruptcy on Wednesday in Los Angeles, listing more than $16 million in disputed claims.

The largest claim is $10.3 million that Wynn Resorts Limited is seeking from the company for judgments entered against "Girls Gone Wild" founder Joe Francis over a gambling debt and statements he has made about the casino and its founder, Steve Wynn.

Francis no longer owns the company, which has made a fortune selling videos and magazines of young women flashing their breasts.

"Girls Gone Wild" issued a statement that it is financially strong but needed to "re-structure its frivolous and burdensome legal affairs."

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Doctor and Patient: Why Failing Med Students Don’t Get Failing Grades

Tall and dark-haired, the third-year medical student always seemed to be the first to arrive at the hospital and the last to leave, her white coat perpetually weighed down by the books and notes she jammed into the pockets. She appeared totally absorbed by her work, even exhausted at times, and said little to anyone around her.

Except when she got frustrated.

I first noticed her when I overheard her quarreling with a nurse. A few months later I heard her accuse another student of sabotaging her work. And then one morning, I saw her storm off the wards after a senior doctor corrected a presentation she had just given. “The patient never told me that!” she cried. The nurses and I stood agape as we watched her stamp her foot and walk away.

“Why don’t you just fail her?” one of the nurses asked the doctor.

“I can’t,” she sighed, explaining that the student did extremely well on all her tests and worked harder than almost anyone in her class. “The problem,” she said, “is that we have no multiple choice exams when it comes to things like clinical intuition, communication skills and bedside manner.”

Medical educators have long understood that good doctoring, like ducks, elephants and obscenity, is easy to recognize but difficult to quantify. And nowhere is the need to catalog those qualities more explicit, and charged, than in the third year of medical school, when students leave the lecture halls and begin to work with patients and other clinicians in specialty-based courses referred to as “clerkships.” In these clerkships, students are evaluated by senior doctors and ranked on their nascent doctoring skills, with the highest-ranking students going on to the most competitive training programs and jobs.

A student’s performance at this early stage, the traditional thinking went, would be predictive of how good a doctor she or he would eventually become.

But in the mid-1990s, a group of researchers decided to examine grading criteria and asked directors of internal medicine clerkship courses across the country how accurate and consistent they believed their grading to be. Nearly half of the course directors believed that some form of grade inflation existed, even within their own courses. Many said they had increasing difficulty distinguishing students who could not achieve a “minimum standard,” whatever that might be. And over 40 percent admitted they had passed students who should have failed their course.

The study inspired a series of reforms aimed at improving how medical educators evaluated students at this critical juncture in their education. Some schools began instituting nifty mnemonics like RIME, or Reporter-Interpreter-Manager-Educator, for assessing progressive levels of student performance; others began to call regular meetings to discuss grades; still others compiled detailed evaluation forms that left little to the subjective imagination.

Now a new study published last month in the journal Teaching and Learning in Medicine looks at the effects of these many efforts on the grading process. And while the good news is that the rate of grade inflation in medical schools is slower than in colleges and universities, the not-so-good news is that little has changed. A majority of clerkship directors still believe that grade inflation is an issue even within their own courses; and over a third believe that students have passed their course who probably should have failed.

“Grades don’t have a lot of meaning,” said Dr. Sara B. Fazio, lead author of the paper and an associate professor of medicine at Harvard Medical School who leads the internal medicine clerkship at the Beth Israel Deaconess Medical Center in Boston. “‘Satisfactory’ is like the kiss of death.”

About a quarter of the course directors surveyed believed that grade inflation occurred because senior doctors were loath to deal with students who could become angry, upset or even turn litigious over grades. Some confessed to feeling pressure to help students get into more selective internships and training programs.

But for many of these educators, the real issue was not flunking the flagrantly unprofessional student, but rather evaluating and helping the student who only needed a little extra help in transitioning from classroom problem sets to real world patients. Most faculty received little or no training or support in evaluating students, few came from institutions that had remediation programs to which they could direct students, and all worked under grading systems that were subjective and not standardized.

Despite the disheartening findings, Dr. Fazio and her co-investigators believe that several continuing initiatives may address the evaluation issues. For example, residency training programs across the country will soon be assessing all doctors-in-training with a national standards list, a series of defined skills, or “competencies,” in areas like interpersonal communication, professional behavior and specialty-specific procedures. Over the next few years, medical schools will likely be adopting a similar system for medical students, creating a national standard for all institutions.

“There have to be unified, transparent and objective criteria,” Dr. Fazio said. “Everyone should know what it means when we talk about educating and training ‘good doctors.’”

“We will all be patients one day,” she added. “We have to think about what kind of doctors we want to have now and in the future.”

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Advertising: A Shared History in Detroit Is an Ad Inspiration

THE Chrysler Group is bringing to life the advertising theme for its Chrysler brand, “Imported from Detroit,” through an innovative partnership with a coming Broadway show that bears the Detroit-inspired name of one of the most famous brands in music.

The partnership unites Chrysler and “Motown: the Musical,” about the musical legacy of Berry Gordy and Motown, the record label he founded that is now owned by the Universal Music Group. The musical, scheduled to open on April 14 at the Lunt-Fontanne Theater, is the beneficiary of an elaborate promotional initiative by the Chrysler brand that supplements the show’s own efforts to encourage ticket sales.

The centerpiece of the Chrysler brand’s support is a television commercial that has been running nationally since December, featuring Mr. Gordy riding in a Motown Edition of a Chrysler 300C sedan as the seminal Motown song “Ain’t No Mountain High Enough” plays on the soundtrack.

The commercial, created by a Chrysler Group agency, GlobalHue in Southfield, Mich., begins with Mr. Gordy at the original “Hitsville U.S.A.” Motown headquarters building in Detroit and ends with him arriving at the Lunt-Fontanne and declaring: “We are Motown. And this is what we do.” As Mr. Gordy enters the theater, the Chrysler slogan appears, altered to read “Imported from Motown.”

The words “ ‘Motown: the Musical’ on Broadway March 2013” appear, referring to the start of previews on March 11, and the address of the show’s Web site, motownthemusical.com, along with the Chrysler brand Web address, chrysler.com.

The commercial is believed to be the first time that a Broadway show has had such paid national television exposure as it prepares to open in New York. The commercial is in addition to a commercial that the producers of “Motown: the Musical” are running on stations in the New York market; the local commercial was created by SpotCo in New York, part of Reach4entertainment Enterprises.

The Chrysler brand will also buttress the show’s marketing with colorful signs to go up in coming days in Penn Station and Times Square. The signs display a Chrysler 300 Motown Edition, the Chrysler logo, the logo of “Motown: the Musical” and photographs of cast members of the show like Brandon Victor Dixon, who portrays Mr. Gordy.

The Chrysler Group is spending an estimated $6 million to $8 million to promote “Motown: the Musical.” The budget for the ads from the show’s producers, Mr. Gordy, Kevin McCollum and Doug Morris, is estimated at $2 million.

The automaker’s efforts extend beyond the product placement and sponsorship agreements that have become increasingly prevalent on Broadway as theater enters the realm of so-called entertainment marketing with television, movies and video games. Unlike the provisions of many of those deals, the Chrysler name is not being added to a lyric of a Motown song, nor are there plans to park a car in the lobby of the Lunt-Fontanne.

Rather, the partnership is about “merging both journeys, the journey of the Chrysler brand and the journey of Mr. Gordy and his music,” said Olivier François, chief marketing officer at the Chrysler Group.

“Motown is the most exported from Detroit of any music and, in this case, imported to New York,” Mr. François said. “It’s putting together the sound and the drive of Detroit. We were meant to meet.”

That thought is expressed in the national commercial, in which a narrator proclaims, “Because if cars are our city’s heart, music is its soul.”

That the partnership is centered on music is no coincidence. Mr. François, a producer of pop music in his native France in the 1980s, described the Motown catalog as “part of the American patrimony” that “will live forever.”

“And so is Chrysler,” he said hopefully. “Regardless of my passion for the Motown music and my respect for Mr. Gordy, I would not have pushed to tie a brand to Motown if there wasn’t this new Chrysler story,” Mr. François said, referring to “Imported from Detroit,” which was introduced in 2011 with a Super Bowl commercial featuring another famous Detroit music figure, Eminem.

“The Motown name has a huge value,” he added. “Does it have a huge value for any car? Maybe not.”

Mr. McCollum, whose Broadway credits include “Avenue Q” and “Rent,” invoked another musical to explain how the show and the Chrysler Group came together: “Kismet.”

“About a year ago, we flew to Detroit and sat down with Olivier and his team, and they pitched the idea,” Mr. McCollum said. “It’s about a collaboration between these two great American industries that came out of one place.”

Besides, he added, Mr. Gordy was “highly influenced by his early days working in an auto plant, learning that you have to put something out there people want.”

Mr. McCollum said he was glad to join Mr. François and Mr. Gordy in “celebrating Detroit when you’d think it’s contrarian thinking” to do so because Motown, Chrysler and “Motown: the Musical” are all about “the power of the American dream.”

The SpotCo campaign for the show — and a public relations effort by Boneau/Bryan-Brown in New York — play that up. The local commercial, for instance, extols Motown’s songs as “the soundtrack that changed America, the beat of a generation, the soul of a nation.”

The goal is “less transactional,” said Ilene Rosen, associate chief operating officer at SpotCo, and “more about synergizing the Motown and Chrysler brands to elevate both.”

As much as other Broadway producers would probably welcome a deep-pocketed partner like the Chrysler Group, the unique circumstances that produced the partnership may make it difficult to emulate, she added.

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Senate, in a More Affable Mode, Backs Treasury Nominee

WASHINGTON – The Senate on Wednesday easily and, for the most part, affably confirmed President Obama’s pick for Treasury secretary, Jacob J. Lew, just one day after the president’s nominee for defense secretary narrowly survived a highly politicized confirmation vote.

Little of the acrimony that held up the nomination of Chuck Hagel, the former Nebraska senator who began his first day as defense secretary on Wednesday, was present in the debate over Mr. Lew.

The final vote was 71 to 26, with 20 Republicans joining the Democratic majority in support of the nomination.

Mr. Obama expressed gratitude for the decision to confirm his former chief of staff and top budget adviser.

“Jack was by my side as we confronted our nation’s toughest challenges,” the president said in a statement. “His reputation as a master of fiscal issues who can work with leaders on both sides of the aisle has already helped him succeed in some of the toughest jobs in Washington.” 

The vote meant that for the moment at least, the Senate returned to its traditional role of affording the president deference in selecting his cabinet. Historically, the Treasury secretary position has been an easy one for presidents to fill, with nominees typically receiving unanimous support from the Senate.

Mr. Obama’s previous Treasury secretary, Timothy F. Geithner, was a notable exception. After disclosures that Mr. Geithner was delinquent in paying some taxes, many Republicans objected. He was confirmed by a 60-to-34 vote.

Some Republicans who voted for Mr. Lew spoke of the need to give the president flexibility to name his own cabinet even if they ultimately disagreed with a nominee’s politics.

“My vote in favor of Mr. Lew comes with no small amount of reservation, and I don’t fault any of my colleagues for choosing to vote against him,” said Senator Orrin Hatch of Utah, the senior Republican on the Finance Committee. “I hope he and the president take note that I am bending over backwards to display deference.”

Though Mr. Hagel’s nomination was stymied as he faced criticism over past statements on Israel and Iran and stumbled over questions in his confirmation hearing, Mr. Lew faced few objections. Other than questions that arose from an unusual $685,000 severance payment he received after he left New York University for a job at Citigroup, the confirmation process was relatively smooth.

One particularly vocal objection on Wednesday came from one of the Senate’s most liberal members, Bernie Sanders, an independent from Vermont.

“We need a secretary of the Treasury who does not come from Wall Street but is prepared to stand up to the enormous power of Wall Street,” Mr. Sanders said from the Senate floor. “Do I believe that Jack Lew is that person? No, I do not.”

Still, even though the Senate approved Mr. Lew, he received far fewer votes than other Treasury secretary nominees. With the exception of Mr. Geithner, Senate records show that the last nominee to receive fewer than 92 “yes” votes was George P. Schultz, Richard Nixon’s pick in 1972.

Mr. Obama faces another possible battle over a high-level nominee in the coming days as the Senate is set to start considering John Brennan, the White House’s choice as director of central intelligence.

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Lawyer says Lohan committed to turning life around

LOS ANGELES (AP) — Lindsay Lohan is committed to turning her life around and wants to record public service announcements on the dangers of domestic violence, alcohol abuse and drunken driving, her attorney said Wednesday.

Mark Heller told The Associated Press that the actress' plans are independent of a criminal case that could return her to jail on charges that she lied to police about being a passenger in her car when it slammed into a dump truck in June.

The "Liz & Dick" star has been repeatedly sentenced to jail, rehab, and community service since her first pair of arrests for driving under the influence in 2007. She spent several months in court-ordered psychotherapy until a judge released her from supervised probation in March 2012.

As part of the intense psychotherapy sessions, Lohan is in the beginning stages of trying to become an inspirational speaker to young people, he said.

"I think she suddenly woke up one morning and had an epiphany and she suddenly realized and appreciated the seriousness of the events that led to her being in court," Heller said.

"She's going to try to inspire hope in people," he said. "I think it will be good for her. It certainly won't hurt others."

Heller mentioned Lohan's intent to become an inspirational speaker in a letter to prosecutors and a judge that was obtained Tuesday. He said he will meet with prosecutors on Friday to try to reach a resolution in Lohan's newest case, which includes misdemeanor charges of reckless driving and obstructing officers from performing their duties.

She has pleaded not guilty. Lohan, 26, was on probation at the time of the crash and faces up to 245 days in jail if a judge determines her conduct violated her probation in a 2011 necklace theft case.

Officers suspected alcohol might have been involved in the June accident on Pacific Coast Highway, but the actress passed sobriety tests at a hospital and she was never charged with driving under the influence.

Santa Monica police Sgt. Richard Lewis said officers did not give Lohan a field sobriety test at the accident scene because she and her assistant were injured in the crash and were taken to a nearby hospital. While officers could not rule out that Lohan might have been drinking, he noted that she did not show signs of impairment.

Celebrity web site TMZ, citing anonymous sources, reported Wednesday that a bottle of alcohol was found next to Lohan's sports car after the crash. Lewis said he could not discuss evidence in the case, but noted that the actress was not charged with drunken driving.

Heller wrote in a motion filed last week that officers found a bottle that they initially thought was urine, but might have contained wine. His filing, which seeks a delay or dismissal of charges against the actress, states that "upon information and belief" the bottle's contents were never tested.

Lohan's case returns to court on Friday, although the actress is not required to attend.

Heller is asking a judge to dismiss the case against Lohan because officers ignored the actress' request to talk to her attorney before being interviewed, court records show. He said he is prepared to defend Lohan at trial if necessary, but is hoping a deal can be worked out. He is seeking a delay in the case to have time to prepare and allow Lohan to demonstrate she is improving her life.

Threats from judges and jail sentences that are invariably cut short because of overcrowding haven't helped Lohan, Heller said. "None of it really brought closure to this predicament that led to this most recent event."

___

Anthony McCartney can be reached at http://twitter.com/mccartneyAP

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Global Health: After Measles Success, Rwanda to Get Rubella Vaccine

Rwanda has been so successful at fighting measles that next month it will be the first country to get donor support to move to the next stage — fighting rubella too.

On March 11, it will hold a nationwide three-day vaccination campaign with a combined measles-rubella vaccine, hoping to reach nearly five million children up to age 14. It will then integrate the dual vaccine into its national health service.

Rwanda can do so “because they’ve done such a good job on measles,” said Christine McNab, a spokeswoman for the Measles and Rubella Initiative. M.R.I. helped pay for previous vaccination campaigns in the country and the GAVI Alliance is helping to finance the upcoming one.

Rubella, also called German measles, causes a rash that is very similar to the measles rash, making it hard for health workers to tell the difference.

Rubella is generally mild, even in children, but in pregnant women, it can kill the fetus or cause serious birth defects, including blindness, deafness, mental retardation and chronic heart damage.

Ms. McNab said that Rwanda had proved that it can suppress measles and identify rubella, and it would benefit from the newer, more expensive vaccine.

The dual vaccine costs twice as much — 52 cents a dose at Unicef prices, compared with 24 cents for measles alone. (The MMR vaccine that American children get, which also contains a vaccine against mumps, costs Unicef $1.)

More than 90 percent of Rwandan children now are vaccinated twice against measles, and cases have been near zero since 2007.

The tiny country, which was convulsed by Hutu-Tutsi genocide in 1994, is now leading the way in Africa in delivering medical care to its citizens, Ms. McNab said. Three years ago, it was the first African country to introduce shots against human papilloma virus, or HPV, which causes cervical cancer.

In wealthy countries, measles kills a small number of children — usually those whose parents decline vaccination. But in poor countries, measles is a major killer of malnourished infants. Around the world, the initiative estimates, about 158,000 children die of it each year, or about 430 a day.

Every year, an estimated 112,000 children, mostly in Africa, South Asia and the Pacific islands, are born with handicaps caused by their mothers’ rubella infection.

Thanks in part to the initiative — which until last year was known just as the Measles Initiative — measles deaths among children have declined 71 percent since 2000. The initiative is a partnership of many health agencies, vaccine companies, donors and others, but is led by the American Red Cross, the United Nations Foundation, the Centers for Disease Control and Prevention, Unicef and the World Health Organization.

This article has been revised to reflect the following correction:

Correction: February 27, 2013

An earlier version of this article misstated the source of the vaccine and some financing for the campaign. The vaccine and financing is being provided by the GAVI Alliance, not the Measles and Rubella Initiative.

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Groupon Shares Crumple After Dismal Outlook, Take-Rate Cut

SAN FRANCISCO (Reuters) - Groupon Inc lost a quarter of its market value on Wednesday after the company revealed it began to take a smaller cut of revenue on daily deals during the holidays, sacrificing revenue and profits to attract and keep merchants.

The cut in its "take rate", which some analysts had said was needed to revive flagging interest among merchants in its Internet offers, was a blow to fourth-quarter results. And a sharper-than-expected post-holiday slowdown in its new e-commerce business contributed to a disappointing first-quarter sales forecast.

The stream of bad numbers, which included a surprise loss in the fourth quarter, drove Groupon's stock down 26 percent to $4.43 in after hours trade. Overall, the company has shed more than three-quarters of its value since debuting at $20 in November of 2011.

"This raises questions about how these guys are going to be able to scale the business," said Tom White, an analyst at Macquarie. "The forecast is underwhelming."

Groupon is among a group of consumer-focused Internet startups that went public to much fanfare in 2011 - before losing massive chunks of market value as investors realized they had over-rated their prospects.

Within a year, Groupon had run into problems dealing with European merchants and sustaining interest among users as deals fever receded. In 2012, analysts speculated that Chief Executive Andrew Mason, known for a quirky sense of humor, may have fallen out of favor with the board.

A company spokesman said Mason remained in charge and the CEO addressed analysts on Wednesday's post-results call.

Groupon reported fourth-quarter revenue rose 30 percent to $638.3 million from $492.2 million in the year-ago period. But it slid into the red with a 1 cent per share loss excluding items, versus expectations for a slim profit of 3 cents a share.

It forecast first-quarter revenue of $560 million to $610 million, sharply below the $650 million average estimate of analysts polled by Thomson Reuters I/B/E/S.

Chief Financial Officer Jason Child told Reuters that Groupon began sharing more money from its deals with merchants early in the fourth quarter, to persuade them to come onboard and run an offer for the first time, or work on another.

This was done selectively in the United States and in Europe, he added.

Historically, Groupon has kept about 40 percent of the money generated by daily deals. That declined to about 35 percent in the fourth quarter. Groupon then "fine tuned" take rates later in the quarter and Child said the company expects profitability to improve as a result.

"We are focused on driving growth," he said in an interview. "We will make the investments we feel we need to optimize for growth and merchant profitability."

THE GOODS ON EUROPE

Merchants have complained that Groupon takes too large a cut of online offers.

Groupon executives forecast long-term take rates of 30 percent to 40 percent for the daily deals business, during a conference call with analysts. One of the reasons Groupon reduced take rates was to create more daily deals for a new business called Local Marketplace, which launched in November.

Groupon has mostly focused on sending daily emails to customers offering vouchers for activities in their area. Local Marketplace relies instead on people searching for something to do or buy nearby, such as an oil change or a massage. By the end of the third quarter, before the launch, Groupon had amassed an online store of more than 27,000 deals for the new marketplace.

Analysts have said the move has potential because Groupon's deals may be more likely to show up in Google searches. By the end of 2012, Groupon claimed almost 37,000 active deals running in North America, and many were longer-term offers for Local Marketplace.

For now, Groupon Goods, the company's discounted product sales business, generated a lot of the fourth-quarter revenue growth, though it's seasonally volatile and generates lower margins than daily deals.

Groupon's limp outlook revived fears its business model may be in jeopardy. Chief among their concerns have been intensifying competition in e-commerce, and a struggling European division walloped by the recession there.

Executives warned a turnaround effort there would take time, and signaled that cost cuts are coming for the company's International business.

Groupon is trying to fix it by reducing the size of discounts on deals there and testing faster payments to higher-quality merchants. Technology used to automate its U.S. operations and sales efforts is being rolled out in Europe now.

Kal Raman, chief operating officer, said more than the twice the number of people are needed to handle and process an International division deal, than in the United States.

A Groupon spokesman said there are no "definite" plans for International job cuts, but there were staff reductions in the United States when the company automated.

"That is an enormous opportunity to organize Groupon's operations to be both more efficient," Raman told analysts during the conference call.

(Reporting by Alistair Barr; Editing by David Gregorio, Richard Chang and Tim Dobbyn)

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DealBook: Wall Street Pay Rises, for Those Who Still Have a Job

7:39 p.m. | Updated

Wall Street may be shrinking — cutting thousands of jobs over the last year — but for those who remain, the pay is still very lucrative.

The average cash bonus for those employed in the financial industry in New York last year rose roughly 9 percent, to $121,900, Thomas P. DiNapoli, New York State’s comptroller, said on Tuesday.

Cash bonuses in total are forecast to increase by roughly 8 percent, to $20 billion this year.

The total, however, is down from 2010, when it was $22.8 billion. Wall Street’s peak came in 2006, before the financial crisis, with a total $34.3 billion in bonuses. The year-end bonus can account for the bulk of a finance professional’s annual compensation.

The report from the state comptroller’s office gives estimates on the bonuses, based on tax withholding data, data from banks and conversations with industry experts. It came the same day that JPMorgan Chase, one of the country’s biggest banks, announced it was eliminating 17,000 jobs over the next two years through layoffs and attrition, adding its name to a string of large banks that continue to cut jobs to reduce expenses.

Wall Street has regained 30 percent of the 28,300 jobs lost during the financial crisis, Mr. DiNapoli said. And firms are continuing to streamline as they cope with a sluggish economic recovery, difficult markets and a heavier regulatory burden. While financial industry employment in New York City was steady in the first half of 2012, it was down slightly in the second half of the year, the comptroller’s office said.

“Wall Street is still in transition, but it is very slowly adjusting to changes in its economic and regulatory environment,” he said.

In an effort to hold down — albeit temporarily — compensation costs, a number of financial firms have deferred cash payments to employees in recent years. Mr. DiNapoli said on Tuesday that part of the increase in 2012 was cash promised in recent years but actually paid out last year. He said that it was difficult to break out what percentage of the total was deferrals, but he believed that it was still a small part of the total.

The ebbs and flows of Wall Street pay have a major impact on the economy of New York City, where 169,700 are employed in finance. Local businesses like restaurants, luxury goods retailers and the upper end of the real estate market pin their fortunes to the flood of cash from year-end bonuses.

Before the start of the financial crisis, business and personal income tax collections from finance-related activities accounted for up to 20 percent of New York State tax revenue. In 2012, that contribution fell to 14 percent.

Yet finance remains the best paying sector in New York City, Mr. DiNapoli told reporters during a conference call.

All told, the average pay package for securities industry employees in New York was $362,900 in 2011, the last year for which data is available, almost unchanged from 2010.

“Profits and bonuses rebounded in 2012, but the industry is still restructuring,” Mr. DiNapoli said. Despite its smaller size, the securities industry is still a very important part of the New York City and New York State economies.”

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