Unemployment rate expected to tick up

At the same time, the unemployment rate is expected to tick up to 4.8%, adding to the post-holiday gloom.

In a week shortened by the New Year's Day holiday on Tuesday, markets can expect data about existing-home sales, construction spending and manufacturing, among other indicators. But analysts say it's the employment report and the ISM manufacturing index that'll grab attention and provide clues about where the economy is going.

"We're looking for a relatively soft [jobs] report," said Dean Maki, chief U.S. economist of Barclays Capital. Maki is forecasting a gain of 80,000 jobs in December, well below recent trends. In November, the economy added 94,000 jobs. On average, economists surveyed by MarketWatch are expecting payrolls to increase by 70,000. See Economic Calendar.

"We are producing a modest number of jobs and that will continue to provide the economy a modest amount of forward momentum," said Ken Mayland, president of Clearview Economics.

The jobs report, including the unemployment figure, is scheduled for release at 8:30 a.m. Eastern on Friday. Separately, the ADP employment report is due out at 8:15 a.m. on Thursday. That report is considered by some to be the best single predictor of the government's nonfarm payroll report. Markets will get one more bit of jobs-related data before the payroll report, with weekly and continuing jobless claims to be released at 8:30 a.m. Thursday.

Despite the comparatively weak expected jobs data, analysts can still point to some signs that the economy is keeping its head above water and holding its own. "We do not believe we are in a recession or that we will be going into one in the near future," said Maki, citing firm consumer income growth, solid household balance sheets and strong growth in the rest of the world. "We are in a period of slower growth."

Manufacturing, measured by the ISM index, will be another tell-tale sign of where the economy's heading. That index is scheduled for release on Wednesday at 10 a.m., and analysts surveyed by MarketWatch are expecting it to be roughly flat in December. Factory orders data for November are also scheduled for release at 10 a.m. Thursday.

Mayland is expecting the ISM index to expand a bit, to 51.5 in December from 50.8 a month earlier. Manufacturing, he said, "may be one of the major factors that helps keep us out of recession."

With growth expected to drop off in the fourth quarter from its 4.9% pace in the third quarter, many analysts are predicting that the Federal Reserve will cut interest rates at its next meeting in late January. Short-term rates now stand at 4.25%, a two-year low.

Apart from the jobs and manufacturing numbers, more home-market data is also on the way.

Existing-home sales are expected to stay roughly the same in November, at a seasonally adjusted annual rate of 5.00 million. They were at 4.97 million in October.

A weak existing-home sales report would follow a grim reading on new-home sales in November, when sales of new units fell by a greater-than-expected 9%. The seasonally adjusted annual rate of 647,000 was the lowest since April 1995. See full story.

Data about existing-home sales are due out at 10 a.m. on Monday.

Construction spending, which has been hit hard by a drop-off in residential projects, is also expected to be weak in November. Analysts surveyed by MarketWatch are expecting spending on construction projects to drop by 0.4%, which would follow a decline of 0.8% in October.

The construction-spending data are scheduled for release on Wednesday at 10 a.m.

Analysts may also get more clues into the Fed's thinking when the central bank releases its latest minutes on Wednesday at 2 p.m. All times are Eastern

Bhutto Conspiracy Theories Fill the Air

If you believe the rumors that zip around Pakistan in the aftermath of one of the country's depressingly regular outbreaks of violence, it's all America's fault. Or India's. Or Israel's. Or it's those Afghan-based militia who keep sneaking across the border. Fueled by cheap cell phone calls and the rise of 24-hour television news channels, gossip about who is to blame for Pakistan's woes runs from the reasonable to the ridiculous.

In the 24 hours since a lone attacker assassinated former Prime Minister Benazir Bhutto, the rumor mill has again been working overtime. In Karachi, amid reports of rioting and sabotage, stories circulated that the city's water supply had been poisoned and people were afraid to drink it. There were also the conflicting accounts of how Bhutto died — from bullet wounds or from a bomb blast that followed or from fracturing her skull against her car's sun-roof as the assailant blew himself up. In the confusion of reports, many Pakistanis are pointing the finger of blame at President Pervez Musharraf and his allies in Washington.

There is no evidence to suggest that Musharraf or Pakistan's security forces were connected to the attack. On jihadi websites, al-Qaeda claimed the assassination was their work and intelligence officials in both Pakistan and the U.S. agree that Islamic extremists from al-Qaeda or the Taliban were probably responsible for the devastating attack. But as Musharraf's popularity has slipped badly, moderate and religious Pakistanis alike have begun to blame him for the increasing chaos in their country — and to trace every incident directly to his rule and his high-profile allies. "This assassination was fabricated by the present government," says Liaqat Baloch, a senior official in Jamaat-e-Islami, one of Pakistan's main Islamic parties. "It is part of the American strategy to scare people that Pakistan is falling apart."

At a time when Pakistan does indeed seem to be falling apart, it may seem absurd and even pointless to repeat such allegations. But the sentiments provide a powerful insight into how angry Pakistanis are at their President and how mistrustful they are of the U.S. At the least, says retired Lieutenant General Hamid Gul, the former director general of Pakistani intelligence organization Inter Services Intelligence (ISI), "it's very convenient for the security forces to call it a suicide bomber because they can cover up the possibility someone else was behind the attack." Gul, who has become a harsh critic of Musharraf over the past year, believes America is partly responsible for its current predicament. "If America continues to act selfishly and unwisely, well, there is hardly any good that has come out [of their help] either for the U.S. or Pakistan, and this will continue."

[As ISI chief, Gul helped run the Afghan mujahideen as a force to counter and eventually defeat the Soviet Union in the 1980s; later he helped establish the Taliban in Afghanistan. He also organized the guerrillas fighting the Indian army in the sections of Kashmir held by New Delhi.]

With such mistrust, rumors thrive. On the streets of Lahore Friday afternoon, many blamed Musharraf and the U.S. rather than Islamic extremists for Bhutto's demise. White-haired Mohamed Sharif, 61, who runs a sidewalk barber's shop using a rusty old metal table and a worn mirror, says the "rumor is that America is involved in this with Musharraf's help." A passerby butts in with his agreement: "America and the government are in the same direction, they are allies," says Sabir Hussain. "If the government is doing this it is on the order of America."

Lahore is a stronghold of opposition leader and former Prime Minister Nawaz Sharif, and is home to plenty of Bhutto supporters as well. In a place that's so heavily anti-Musharraf, innuendo seems to feed on itself. On the city's main street, lined with policemen holding batons and wearing anti-riot gear, two teenagers out for a walk say they have also heard about a possible government connection to the attack but cannot offer any evidence to back up the claims. "My mother told me not to talk about this topic on my mobile or telephone because the government may tape it," says Hafiz Jamshaid, 18, a computer science student at a local college.

Across town, in a park in the tony neighborhood known as Defense Housing Authority, or DFA, four business associates discussed Pakistan's future after their regular afternoon walk. "People are afraid to air their opinions but as far as I know America sent Benazir and later killed her with the help of Pervez Musharraf," says M.A. Mohamed, who runs a car parts company. "I can confirm this idea." His friend and colleague Talat Mumtaz interjects: "No, no. no, America likes Benazir. Why would they kill her? You're being ridiculous."

"No one knows what are the facts," complains Constable Jafar Hamid, proudly showing off his English as he guards a McDonald's outlet, closed against possible rioting. So where do all the rumors come from? "We don't believe in one thing, we don't think like a nation," he says. "Everybody has his own opinion and that is part of the problem." With reporting by Khuda Yar Khan/Islamabad

An Asteroid Hurtles Toward Mars

Astronomers have good news, better news and some bad news about an asteroid known as 2007 WD5. The good news is that this 164-ft.-wide chunk of speeding space rock, discovered in November in an ongoing search for potential threats to Earth, won't hit our planet any time in the foreseeable future. The better news — for eager space-watchers — is that the asteroid, currently about halfway between Earth and Mars, has a plausible chance of hitting the Red Planet at the end of January. If it does, astronomers will be treated to an unprecedented sight.

The event itself, however, will have plenty of precedent. The craters that pock the surface of Mars, the Moon, Mercury and other Solar System bodies come from about four billion years' worth of this sort of thing. Earth has had plenty of collisions too; it's just that erosion, continental drift and vegetation have erased or hidden most of them. Not all, though: Meteor Crater, in Arizona, was blasted out some 50,000 years ago by an asteroid about the same size as 2007 WD5. A much bigger object, a few miles across, is thought by many scientists to be the reason the dinosaurs died out some 65 million years ago.

If 2007 WD5 does smack into Mars, every telescope on Earth will be pointed in that direction — just as they were in 1994 when Comet Shoemaker-Levy 9 crashed into Jupiter. In that case, the comet broke up while it was still in orbit, so astronomers watched nearly two dozen individual impacts. But Jupiter is made mostly of thick clouds, so there was no lasting scar, and because it lies so far from Earth, the event wasn't quite as spectacular as this one promises to be. Asteroid 2007 WD5 should release some 3 megatons of energy if it slams into solid ground near Mars' equator, and orbiting satellites will show the aftermath with crystal clarity.

Finally, the bad news: 2007 WD5 has only a 1-in-75 chance of actually hitting Mars, which means astronomers would be wise to be pessimistic. But the possibility of impact calls to mind a loosely related incident that occurred almost exactly 100 years ago, when something exploded above the Tunguska region of Siberia, flattening trees in a 25-mile radius, their trunks pointing outward from the epicenter of the blast. Scientists are pretty sure it was a comet or asteroid — about the same size as 2007 WD5, as it happens — that disintegrated from its own shock wave as it plowed through the atmosphere. (UFO enthusiasts have long been convinced it was a flying saucer that somehow made it across trillions of miles of interstellar space safely, only to blow up above Russia.) The scientific explanation would account for the aerial explosion, and also the fact that no crater has been found.

Except that now maybe it has. An Italian team has measured seismic waves reflecting off a high-density spot in the bottom of the suspiciously crater-shaped Lake Cheko, which lies close to the event's ground zero. It could be a piece of the original object — and finding it could help investigators understand exactly what happened a century ago.

If they find a burned-out flying-saucer engine, all bets are off.

A Bhutto Successor?

A senior official of Benazir Bhutto's Pakistan People's Party (PPP) told TIME late Saturday that the slain former prime minister's 19-year-old son, Bilawal, will likely be named as her political heir and the new party leader on Sunday. PPP members are due to meet to discuss the party's future and to give Bilawal, a student at Oxford, a chance to read his mother's last will and testament.

A Pakistani television news channel also carried reports that Bilawal will be made the new leader, which the channel said accorded with Benazir Bhutto's wishes. If confirmed, the teenager will become the third leader of the 40-year-old center-left party, one of Pakistan's most powerful. Bilawal will follow his grandfather, Zulfikar Ali Bhutto, who founded the PPP in 1967, led Pakistan as Prime Minister for four years in the mid 1970s and was hanged in 1979 by a military government, and Benazir, who took over from her father and was killed in a shooting and suicide bomb attack two days ago.

The quick anointment of a Bhutto to head the PPP will help rally party members devastated by the assassination of their tough but beloved leader. The party hopes to ride a wave of sympathy in parliamentary elections that are set for Jan. 8 but may yet be postponed in the face of widespread violence around the country. Rival opposition parties have called for a boycott of the polls but PPP officials say their party intends to participate.

Bilawal was born in September 1988, nearly three months before his mother was elected Prime Minister for the first time. After Benazir and her children went into self-imposed exile in the late 1990s, the family split their time between London and Dubai, where Bilawal attended the Rashid School for Boys, serving as vice president of the school's student council. In Fall 2007 he enrolled at Oxford, where both his grandfather and his mother studied. A 2004 profile of Bilawal in the respected Pakistani daily newspaper Dawn said the teenager liked target-shooting, swimming, horseback riding and squash, and regretted being away from Pakistan in part because it meant he played less cricket. His grandfather, he said, "was a very courageous man and I consider myself very lucky because I have three powerful role models that will obviously influence my career choices when I am older."

As PPP members have begun to contemplate who should take over as party leader, a consensus has emerged that the person needs to be a Bhutto, a name that retains incredible power and vote-winning influence in secular Pakistan despite — or perhaps because of — the tragedies and controversies the family has faced. It is not the first time a young Bhutto has taken over from a dead parent. "This was also the situation when Zulfikar Ali Bhutto was murdered," says Babar Awan, a PPP Senator and close ally of Benazir. "Benazir was a teenager, she was a student at Harvard in 1979 [when Zulfikar Ali was hanged]. It is basically the hard core of the PPP that rallies around their great hope and that they attach to the House of Bhutto."

Many people had tipped Benazir's husband Asif Ali Zardari for the top spot, and in the unpredictable world of Pakistani politics that could still happen. An experienced politician, Zardari served as Environment Minister in his wife's second administration. But he is also a controversial figure in Pakistan, and has spent a total of 11 years in prison on various charges including blackmail and corruption, for which he earned the nickname "Mr. 10%." Supporters dismiss these charges, most of which have been thrown out of Pakistani courts (a few are still pending), as politically related mischief. "He's a strong man," says PPP Senator Awan. "All of us are controversial. Wasn't Benazir Bhutto? Wasn't Zulfikar Ali Bhutto? All those who don't accept the military role in politics are controversial. The charges are 100% unfounded and fake."

Other possible runners include Benazir's sister Sanam, though she seems incredibly reluctant to join the family firm, or Fatima Bhutto, the daughter of Zulfikar Ali's eldest son Murtaza. Fatima, however, had split with her aunt Benazir, whom she once described as "the most dangerous woman in Pakistan." The decision to go with Bilawal appears to have come after his father turned down the job in deference to the slain Benazir's expressed wishes. The senior PPP official, who requested anonymity to allow him to speak more openly, told TIME that Bilawal will head the party, and that the party's deputy leader and longtime Benazir loyalist, Mukhdoom Amin Fahim, is likely to become the prime minister, assuming the party wins a majority in parliament. Bilawal would take over as the parliamentary leader once he finishes his studies and once he has more experience, the official said. Earlier in the day PPP Senator Awan told TIME that Bilawal was a natural future leader. "Yes, of course," he said. "he has to be groomed and trained but that will happen."

The young Bhutto, Benazir's only son, knows the dangers of the job he might be about to take on. Last year Benazir told a reporter that she hoped her three children would choose a different career. "My children have told me they are very worried about my safety," she said. "I understand those fears. But they are Bhuttos and we have to face the future with courage, whatever it brings."

—With reporting by Jumana Farouky/London and Khuda Yar Khan/Islamabad

Source: www.time.com/time/world/article/0,8599,1699006,00.html

Bhutto's Jihadist Enemies

Benazir Bhutto had long been an outspoken critic of Pakistani militants and this made her the mortal enemy of a galaxy of extremist forces inside Pakistan. "Bhutto was the only Pakistani politician willing to stand up and say, 'I don't like violent terrorists,'" says Stephen Cohen, senior fellow at the Brookings Institution. Many of these groups have intertwining histories and common loyalties — as well as shadowy links with Pakistani intelligence. As the probe into her assassination begins, investigators will have to sort through a morass of violent groups that were gunning for Bhutto. And while all have some historic link to al-Qaeda, they have just as much ideological impetus to act on their own — or at the behest of rogue elements of the Pakistani government sympathetic to Islamic radicals.

In a briefing Friday, the Pakistani government emphasized that al-Qaeda had Bhutto in its sights. "As you all know, Benazir Bhutto had been on the hit list of terrorists ever since she had come to Pakistan," said Javed Iqbal Cheema, the Interior Ministry spokesman. "She was on the hit list of al-Qaeda."

According to reports from the Pakistani Interior Ministry, the suicide bomber who killed Benazir Bhutto belonged to a domestic terrorist organization with links to al-Qaeda called Lashkar-i-Jhangvi. The group is responsible for dozens of attacks inside Pakistan over the past decade including sectarian killings of Shi'ites and Christians, a failed 1999 assassination attempt against then-Prime minister Nawaz Sharif, and involvement in the kidnapping and beheading of the Wall Street Journal correspondent Daniel Pearl. An FBI and Department of Homeland Security bulletin sent out Thursday cited unsubstantiated reports that Lashkar-i-Jhangvi had claimed responsibility for Bhutto's assassination. An FBI official said that the bulletin was based on press reports and would not comment on whether the claim had been independently confirmed.

On Friday, a Pakistani Ministry of Interior spokesman identified another suspect: Baitullah Mehsud, a Taliban leader and an influential tribal chief in Waziristan, a restive Pakistani province on the Afghan border. Pakistani intelligence services intercepted a supposed conversation in which Mehsud congratulated those who carried out the assassination. "Fantastic job," reads the transcript released by the Pakistan Ministry of Interior, "[They were] very brave boys who killed her." But a spokesman for Mehsud told the Associated Press on Saturday that the militant was not involved in the attack, calling the allegation "government propaganda."

In 2005, Mehsud had been party to an agreement with the Pakistani government to cease his protection of al-Qaeda in his region. The Pakistani government has since then considered the agreement to have been broken. Says Frederic Grare, a former French diplomat in Pakistan and a scholar at the Carnegie Endowment for International Peace, "Mehsud is a very convenient [person to blame]. He’s the bad guy in the trouble areas." He asks, "Why would Mehsud be willing to kill Benazir? Beyond the stated fact that she’s against extremism. How do [Mehsud's people] benefit from Benazir’s assassination?"

It is not absolutely clear if or how Mehsud and Lashkar-i-Jhangvi link up. But both the Taliban and Lashkar-i-Jhangvi emerged from the two decades of fighting in Afghanistan, where eventually a Taliban regime would give refuge to al-Qaeda. Pakistani intelligence services were also active in Afghanistan, encouraging Muslim fighters in their war against the Soviet occupation of that country. One of the groups that emerged from this group was Lashkar-i-Tayyba or the "Army of the Pure," which Pakistani intelligence agents, after the end of the Afghan war, would redirect toward Kashmir and the Indian troops stationed in that disputed region. In January 2002, giving in to international pressure, the government of Pervez Musharraf finally kicked Lashkar-i-Tayyba out of Kashmir.

The group accused in Bhutto's killing, Lashkar-i-Jhangvi, was also among the alphabet soup of militant groups that were spawned by the Afghan war.One of the most vicious of these groups called itself Sipah-e-Sahaba and used religious justifications for jihad from an austere sect of Islam called Deobandi, similar to the ideology of the Taliban. Sipah-e-Sahaba and similar groups believe that one obligation of "true Muslims" is to kill so-called apostates like Shi'ites. In the early 1990s, these veterans from the Afghan wars, with no more war to fight, launched a bloody sectarian campaign against Pakistani Shi'ites. In 1996, amid these attacks, Lashkar-i-Jhangvi was formed by a disgruntled member of Sipah-e-Sahaba who named his group after the martyred founder of Sipah-e-Sahaba, Haq Nawaz Jhangvi. (Lashkar is an Urdu word meaning Army, hence "The Army of Jhangvi.") In January 1998, four Lashkar-i-Jhangvi gunmen fired AK-47 machine guns on a Shi'ite wake in Mominpura cemetery near Lahore, killing 24 mourners.

The group has close ties to al-Qaeda. The leadership of Lashkar-i-Jhangvi fought alongside many high-ranking al-Qaeda and Taliban operatives against the Northern Alliance in Afghanistan before Sept. 11, 2001. U.S. intelligence agencies believe many in its ranks trained in al-Qaeda-run camps in Afghanistan during the late 1990s. When al-Qaeda retreated from Afghanistan in 2002, many of its fighters are believed to have joined forces with Lashkar-i-Jhangvi and Lashkar-i-Tayyba, according to the State Department, which lists both groups as foreign terrorist organizations. Since then, the groups have targeted pro-Western entities of Pakistani society. In March 2002, Lashkar-i-Jhangvi retaliated against the U.S. invasion of Afghanistan and the resulting fall of the Taliban by launching a grenade attack on the International Protestant Church in Islamabad that killed 5 and injured dozens. In May, a car bombing outside a Karachi hotel killed 14, including 11 French defense technicians. Lashkar-i-Jhangvi is believed to have been behind it.

"It is probable there are links between Lashkar-i-Jhangvi and al-Qaeda," says Grare, "but it is certain they do have links to the government." He adds, "If the government itself says Lashkar-i-Jhangvi is involved, it is suicidal because it opens the door to speculation about their own role." Indeed, while Pakistani authorities have had a hand in encouraging groups like Lashkar-i-Jhangvi and Lashkar-i-Tayyba, Islamabad has done little to systematically dismantle these jihadist "armies" now that their original purposes — fighting the Soviets and supporting the Taliban in Afghanistan or fighting the Indians in Kashmir — are over. "They have nothing else to do," says Cohen, "and they are causing mischief." He adds: "It's like a cancer you've started elsewhere that comes back to eat you up."

source: www.time.com/time/world/article/0,8599,1698949-2,00.html

U.S. suspects Taliban leader behind Bhutto plot

U.S. officials suspect a Taliban leader from Afghanistan may be behind the plot to assassinate former Pakistani Prime Minister Benazir Bhutto, a senior official said Friday.

The official identified Taliban leader Baitullah Mehsud as a leading suspect, saying there's "good information that leads us to believe he is the guy responsible."

Earlier Friday, the Pakistani Interior Ministry said it had "intelligence intercepts" indicating Mehsud was behind the opposition leader's death the day before in Rawalpindi.

"As you all know, Benazir Bhutto had been on the hit list of terrorists ever since she had come to Pakistan," said the Interior Ministry spokesman, Brig. Javed Iqbal Cheema. "She was on the hit list of al Qaeda."

Cheema said the Pakistani government intercepted a communication Friday in which Mehsud "congratulated his people for carrying out this cowardly act."

The Pakistani government released a transcript of the phone conversation in which Mehsud purportedly congratulates another man for a job well done. "Fantastic job. [They were] very brave boys who killed her," he said, according to the transcript.

No one has accepted responsibility for Bhutto's death on radical Islamist Web sites that regularly post such messages from al Qaeda and other militant groups.

Robert Grenier, former CIA station chief in Pakistan and former head of the CIA's counterterrorism center, describes Mehsud as an Islamic radical leader in northwest Pakistan's South Waziristan closely associated with the Taliban.

Grenier said that Mehsud spoke publicly before Bhutto's return to Pakistan in October after her self-exile that the former prime minister was marked for assassination.

The Los Angeles Times reported Friday that Mehsud allegedly pledged to dispatch suicide bombers against Bhutto but that Mehsud has denied that allegation.

The Interior Ministry also said earlier the suicide bomber belonged to Lashkar-e-Jhangvi, a Sunni Muslim militant group with links to al Qaeda, Pakistan's GEO TV reported.

There was no sign the group has claimed responsibility for the attack on the Pakistan opposition leader.

The U.S. State Department lists Lashkar-e-Jhangvi as a terrorist organization and said it had links to the Taliban. Pakistani President Pervez Musharraf banned the group in 2001.

Also Friday, the state-run news agency Associated Press of Pakistan reported al Qaeda had claimed responsibility for killing Bhutto.

The agency quoted Cheema as saying, "Al Qaeda in a statement has accepted the responsibility of her assassination, as in the past she had been receiving life threats from this terrorist group."

CNN could not independently confirm that al Qaeda has claimed responsibility.

Bhutto, 54, died as a result of a fractured skull after hitting her head on a sunroof lever of her vehicle, Chema said.

He said Bhutto suffered no bullet or shrapnel wounds, contradicting all previous government statements regarding her injuries. Authorities had said Bhutto was targeted by gunshots seconds before a suicide bombing as she was leaving a rally.

On Thursday, the FBI and Department of Homeland Security issued a bulletin citing an alleged claim of responsibility by al Qaeda for Bhutto's death, a DHS official said.

But FBI and other law enforcement officials said the claim was unsubstantiated and that federal officials are not making any comments about its validity.

Italian news agency Adnkronos International apparently was the source of this claim, saying the terror network's Afghan commander and spokesman Mustafa Abu Al-Yazid had telephoned the agency with it.

"We terminated the most precious American asset which vowed to defeat [the] mujahedeen," the Italian news agency quoted Al-Yazid as saying.

The agency said that al Qaeda's No. 2 official, Ayman al-Zawahiri, set the wheels in motion for Bhutto's assassination in October.

The DHS official said the claim was "an unconfirmed open source claim of responsibility" and the bulletin was sent out at about 6 p.m. Thursday to state and local law enforcement agencies.

The official characterized the bulletin as "information sharing."

FBI spokesman Richard Kolko said the validity of such a claim is "undetermined." Kolko said the FBI and the intelligence community is reviewing it "for any intelligence value."

New home sales hit 12-year low

Sales of new homes have plunged even more than expected to their lowest level in more than 12 years, leaving the market glutted with unsold homes and pointing to more trouble ahead for the battered housing market.

New home sales tumbled 9 percent in November to a seasonally adjusted annual rate of 647,000, according to a Census Bureau report Friday.

That was the worst showing since April 1995, when the pace of sales was 621,000, and is much worse than the 715,000 sales pace forecast by economists surveyed by Briefing.com.

The sales pace is down more than a third from year-ago levels. Furthermore, the decline is widespread nationwide, ranging from a 28 percent drop in the Northeast to a 38 percent plunge in the Midwest.

The weak sales pace still probably overstates demand for new homes since it counts a home as sold when a contract is signed, even though in many cases a contract is cancelled before a sale is closed. In fact, most major builders have reported sharp increases in cancelled orders in recent months because buyers have struggled to arrange financing or sell their existing homes.

While the median sales price of $239,100 in November represented a 4.2% jump from October, that previous reading was the lowest in more than two years. The new price reading is still off 0.4 percent from year-earlier levels and off 8.9 percent from the record high price of $262,600 hit in March before the full impact of the meltdown in subprime mortgages was felt.

Michael Larson, a real estate analyst with independent research firm Weiss Research, said the report understates price weaknesses because it does not account for the incentives like picking up buyers' closing costs builders are using to spur sales.

"You see the builders are still struggling to get the business right," said Larson. "They're cut back on production; now they've got to get that pricing right to get the buyers to move."

The glut of new homes on the market rose to a 9.3-month supply, as the number of completed homes for sale reached a record 193,000 at the end of the reporting period. Builders now typically have to wait 6.2 months to sell a completed home, the longest wait since July 1993.

While new home sales make up only a fraction of the overall real estate market, this report is closely watched as a more leading indicator of market strength than the report on existing home sales, which is due out Monday from the National Association of Realtors. The existing home sales report tracks existing home sales when they are closed, typically a month or two after a sales contract is signed.

Economists surveyed by Briefing.com forecast that existing home sales edged up to a 5 million annual sales rate in November from October's 4.97 million, which was the weakest sales reading of existing homes on record despite the largest drop in prices.

How they got housing wrong

The downturn in new home sales has hammered the results of the nation's leading home builders. Many of them have been forced to take large charges to writedown the value of their holdings.

A month ago Lennar (LEN, Fortune 500), the No. 1 home builder by revenue, reported that it was selling 11,000 properties to the real estate arm of Wall Street firm Morgan Stanley (MS, Fortune 500) for only 40 percent of their previously stated value.

The charges taken by many builders have caused many builders to report larger-than-expected losses. D.R. Horton (DHI, Fortune 500), the No. 3 builder, reported a smaller-than-expected loss in late November, but that followed a quarter with a loss that was much wider than forecast.

Hovnanian Enterprises (HOV, Fortune 500), the nation's No. 6 builder by revenue, posted a full-year loss this month and said the market remains very challenging, prompting credit rating agency Moody's to say it was reviewing whether to downgrade its debt further into junk-bond status.

Builders' chief: We built too many homes

In October, Moody's downgraded the debt of Lennar, No. 2 builder Centex (CTX, Fortune 500) and No. 4 Pulte Homes (PHM, Fortune 500) to junk bond status.

Earlier this month, luxury home builder Toll Brothers (TOL, Fortune 500) posted its first loss in 22 years as a public company

Bhutto's Funeral Images

Bhutto died after hitting sun roof

Benazir Bhutto died as a result of a fractured skull after hitting her head on part of her car's sun roof, not as a result of a bullet or bomb shrapnel, a spokesman for Pakistan's Interior Ministry said Friday.

Nothing entered the opposition leader's head, said spokesman Brigadier Javed Iqbal Cheema.

At a news conference, Cheema showed images of Bhutto in a car, standing up through an open sunroof, looking out at the crowd as she was about to be driven away.

When the gunshots rang out and the explosion occurred, Bhutto "fell down or perhaps ducked" and apparently hit her head on a lever, Cheema said, adding that the lever was stained with blood.

Earlier, the ministry said in a report carried by the state-run news agency Associated Press of Pakistan that she was killed by shrapnel from the suicide bomb that was detonated as she stood up through the sun roof while being driven away from a political rally.

The blast killed at least 28 more people and at least 100 were wounded.

And it was initially reported on Thursday that the two-time former prime minister had died due to prior gun shots fired by the bomber.

The Interior Ministry also revealed Friday that it had proof showing that al Qaeda was behind Bhutto's assassination.

Brigadier Javed Iqbal Cheema said the government had an intelligence intercept in which an al Qaeda militant "congratulated his people for carrying out this cowardly act."

However, that claim has not appeared on radical Islamist Web sites that regularly post such messages from al Qaeda and other militant groups.

The Interior Ministry also earlier told Pakistan's GEO-TV that the suicide bomber belonged to Lashkar-e-Jhangvi -- an al Qaeda-linked Sunni Muslim militant group that the government has blamed for hundreds of killings.

U.S. officials believe that a Taliban leader from Afghanistan, Baitullah Mahsud, may be the person behind the assassination.

Bhutto was laid to rest in a chaotic funeral at her ancestral home Friday after violent scenes erupted across Pakistan following her death a day earlier.

Bhutto was interred alongside her father in the southern Pakistan town of Garhi-Khuda Baksh.

Hundreds of thousands of people in the surrounding streets almost brought the procession to a standstill before it finally reached the Bhutto family's mausoleum.

The throngs of her grieving supporters crushed up against the flag-draped coffin, while minor scuffles also broke out.

Violence had earlier erupted in Pakistan in the hours before Bhutto's funeral started, with at least nine people reported killed and banks, train stations and cars torched.

Bhutto's body arrived in the hours before dawn at Garhi-Khuda Baksh after a long journey by plane, helicopter and ambulance

The opposition leader's family -- her husband Asif Ali Zardari and three children -- accompanied the body aboard a Pakistani Air Force C-130 transport plane to Sukkor but traveled by bus from there to Larkana and on to Garhi-Khuda Baksh.

Another former prime minister, Nawaz Sharif, told CNN on Friday that he had planned to attend Bhutto's funeral, but was advised not to by Zardari, who cited security concerns.

"He said that we must not come today in view of these inadequate security arrangements," Sharif said. "The security arrangements are far from satisfactory."

In the aftermath of the assassination, the prime minister's office has launched a judicial inquiry and the Ministry of the Interior is setting up a police inquiry, according to Information Minister Nisar Memon.

Memon said no decision had been made to postpone parliamentary elections scheduled for January 8.

"We remain on course," he said.

Sharif, who visited the hospital to pay his respects to Bhutto, later announced that he and his party would boycott the elections.

Bhutto, who was campaigning for the elections, had completed an election rally minutes earlier and was leaving the rally site, Rawalpindi's Liaquat Bagh Park, at the time of the attack.

Her father and former prime minister, Zulfiqar Ali Bhutto, was hanged in the same northern city in 1979.

As a shocked Pakistan absorbed the news of Bhutto's death, authorities called for calm and asked residents to stay inside.

Many obliged, shuttering shops or rushing home from work and surrendering the streets to protesters who set fire to banks, shops and gas stations, blocked roads and pelted police with rocks, Pakistani media reported.

At least five people were killed in Karachi in the violence, GEO-TV reported, and dozens more were wounded. Police in Khairpur fired on an angry mob, killing two people, the station reported, and two more people were killed in Larkana.

"It's all mayhem everywhere," Shehryar Ahmad, an investment banker in Karachi, told CNN by telephone. "There's absolutely no order of any kind. No army on the streets. No curfew."

In Sindh province, where Karachi is located, police said demonstrators had burned a dozen banks, set two train stations on fire, along with three trains. Since Thursday, 240 vehicles have been burned.

Because of the violence, paramilitary forces in Sindh were told to "shoot on sight" anyone causing civil disturbances, a spokesman for the Pakistan Rangers said.

Local media reported that in some areas, police were on the streets but were avoiding direct confrontation with the mobs, not wanting to inflame an already tense situation.

But by Friday morning, Pakistani media reported that an uneasy calm had spread across the shaken country, now marking a three-day period of mourning declared by President Pervez Musharraf.

Bhutto led Pakistan from 1988-1990 and 1993-96, but both times the sitting president dismissed her amid corruption allegations. She was the first female prime minister of any Islamic nation.

A terror attack targeting her motorcade in Karachi in October killed 136 people on the day she returned to Pakistan after eight years of self-imposed exile.

Bhutto had been critical of what she believed was a lack of effort by President Musharraf's government to protect her.

Two weeks after that assassination attempt, she wrote a commentary for CNN.com in which she questioned why Pakistan investigators refused international offers of help in finding the attackers.

Source: www:edition.cnn.com/2007/WORLD/asiapcf/12/28/pakistan.friday/index.html?iref=mpstoryview

Bhutto photographer: 'Gunshots rang out and she went down'

The photographer who took images of former Pakistani Prime Minister Benazir Bhutto moments before her assassination Thursday told CNN he was "surprised" to see her rise through the sunroof of her vehicle to wave to supporters after delivering her speech.

"I ran up, got as close as I got, made a few pictures of her waving to the crowd," Getty Images senior staff photographer John Moore told CNN's online streaming news service, CNN.com Live, in a phone interview Thursday from Islamabad, Pakistan.

And then suddenly, there were a few gunshots that rang out, and she went down, she went down through the sunroof," he said. "And just at that moment I raised my camera up and the blast happened. ... And then, of course, there was chaos."

Moore said he was about 20 yards away from Bhutto's vehicle when he took his photographs. Bhutto was rushed to Rawalpindi General Hospital, where she was pronounced dead.

Moore said he had been following Bhutto's story since her return to Pakistan in October. He was present October 19 when a terror attack targeting her motorcade in Karachi killed 136 people. In the aftermath of that attack, "the rallies had been very small," because of high security, Moore said.

However, the Rawalpindi rally was announced beforehand, he observed.

"Whoever planned this attack -- they had time on their hands to plan everything properly, and you saw the results today," he said.

Between 5,000 and 8,000 were at the Rawalpindi rally, which was held at a parkground, he said. "We [the news media] all expected it to be filled ... but there were less people there than most of us expected to see," he said. "When I talked with a number of people, they said that people were just afraid to come out, for the simple reason that they all remembered what happened in Karachi."

Moore said he himself expected there could be another attack following the Karachi massacre. He said he stayed away from gates at the Rawalpindi parkground, where police were searching people, because he suspected that's where a bomb would go off.

Moore said it was obvious that Bhutto enjoyed being with her supporters. "She was clearly in her element," he said. "She just wanted to get close to the people, and obviously whoever was after her -- they saw that coming."

Hold Musharraf responsible --Bhutto

In an e-mail sent to a confidant in the US two months ago, assassinated Pakistani opposition leader Benazir Bhutto said she would hold the country's current leader Pervez Musharraf "responsible" because his government did not do enough to provide for her security. "I would hold Musharraf responsible," Bhutto wrote in the October e-mail.

"I wld [sic] hold Musharaf [sic] responsible," Bhutto wrote to her US spokesman, Mark Siegel, in the October e-mail, which was reported Thursday afternoon by CNN's Wolf Blitzer. "I have been made to feel insecure by his minions, and there is no way what is happening in terms of stopping me from taking private cars or using tinted windows or giving jammers or four police mobiles to cover all sides cld [sic] happen without him." Blitzer told viewers he received the e-mail soon after it was sent two months ago, but he agreed not to report on it unless Bhutto was assassinated.

We terminated Benazir Bhutto, claims al-Qaeda

“We terminated the most precious American asset which vowed to defeat [the] mujahadeen,” Al-Qaeda’s commander and main spokesperson Mustafa Abu Al-Yazid told Adnkronos International (AKI) in a phone call from an unknown location, speaking in faltering English. Al-Yazid is the main al-Qaeda commander in Afghanistan.

It is believed that the decision to kill Bhutto, who is the leader of the opposition Pakistan People's Party (PPP), was made by al-Qaeda No. 2, the Egyptian doctor Ayman al-Zawahiri in October.

Death squads were allegedly constituted for the mission and ultimately one cell comprising a defunct Lashkar-i-Jhangvi’s Punjabi volunteer succeeded in killing Bhutto.

Bhutto had just addressed a pre-election rally on Thursday in the garrison town of Rawalpindi when the bomb went off.

She had come to Rawalpindi after finishing a rapid election campaign, ahead of the January polls, in Pakistan's volatile North West Frontier Province (NWFP) where she had talked about a war against terrorism and al-Qaeda.

Benazir Bhutto killed in suicide bomb blast

Over 20 people were reportedly killed while several others were injured. President Musharraf has convened an emergency meeting of top advisors. Reports state Benazir finished the rally at 5:30 pm and was on her way back to Ralwal.

She got into the car and was soon after attacked by two people with AK 47s. A suicide bomber blew himself up next to her car.

Fifty-four-year-old Benazir was rushed to Rawalpindi general hospital, where she was pronounced dead nearly 40 minutes later.

Bhutto is survived by her husband Asif Ali Zardari and three children.The funeral is likely to be held on Friday in Bhutto's hometown Larkana.

National and provincial assembly elections in Pakistan are due on January 8. It may be recalled that in October, around 130 people were killed in an attack on Bhutto's cavalcade when she returned to Pakistan.

Bhutto killed in suicide bomb blast ( images )

BENAZIR BHUTTO ASSASSINATED

After surviving several assassination attempts in the past, PPP leader Benazir Bhutto was not so lucky on Tuesday as she was killed by two gunmen who opened fire at her right after she finished addressing a rally at Liaquatbagh.

Bhutto got off the stage after addressing the rally and started moving towards her car. Her vehicle moved a certain distance and she was surrounded by party supporters.

She came out of the car and just then two attackers with AK 47s pumped her with bullets, one in the neck and two in the head, before blowing themselves up.

The attack also killed more than 20 people and left several others injured.

Following Bhutto's death, a high alert has been sounded in Pakistan. President Musharraf has convened an emergency meeting of top advisors. Shops and petrol pumps have closed in many cities fearing violence.

Shops across Rawalpindi are being torched by PPP supporters. Asif Zardari and his children are on their way to Karachi.

According to preliminary reports, Benazir finished the rally at 5:30 pm at Liaquatbagh and was on her way back to Ralwal. She got into the car and was soon after attacked by two people with AK 47s. A suicide bomber blew himself up next to car.

Nawaz Sharif described Benazir Bhutto's assassination as the most tragic incident in the history of Pakistan.

''I myself feel threatened,'' says Sharif, whose party temporarily suspended the electioneering in the wake of the assassination.

''Are things in control now? Had things been in control, would this have happened?'' he said, adding that Pakistan President Pervez Musharraf would have to give answers.

''I also feel unprotected and the lady must also have been feeling very unprotected,'' Sharif said.

Criticising Musharraf, he said, ''If Musharraf can spend crores on his own security, could he not spend some amount on the security of Bhutto.''

Fifty-four-year-old Benazir was rushed to Rawalpindi general hospital, where she was pronounced dead nearly 40 minutes later.

''We are traumatised. People all over are crying. Everyone is saying that this Army has killed Benazir. There is going to be more bloodshed. Will the world now finally wake up? said a distraught Asma Jehangir, Chairperson, Pak Human Rights Commission.

''It is very tragic. It has shocked every Pakistani,'' said Ayaz Amir, columnist.

Prof. Bhim Singh, Chairman of the National Panthers Party and Member of National Integration Council (NIC) while condemning the brutal assassination of Benazir Bhutto Pakistan's foremost political leader and the former Prime Minister termed it as most cowardice act of the terrorists and total failure of Pakistan government.

Bhutto is survived by her husband Asif Ali Zardari and three children. Before she returned to Pakistan in October, Benazir Bhutto told NDTV that she was not afraid of the threats.

In the first reactions coming in from New Delhi, Minister of State for External Affairs Anand Sharma said, ''We are shocked and saddened by this. Benazir was a promising leader with her own stature in Pakistan. It has happened at a time when the people of Pakistan were looking up to her. We offer our condolences to her bereaved family members and friends.''

The funeral is likely to be held on Friday in Bhutto's hometown Larkana.

National and provincial assembly elections in Pakistan are due on January 8.

In October some 130 people were killed in an attack on Bhutto's cavalcade when she returned to the country.

It was one of the worst incidents of violence in a year of deteriorating security in Pakistan.