With record highs in sight, stocks face roadblocks

NEW YORK (Reuters) - If Wall Street needs to climb a wall of worry, it will have plenty of opportunity next week.

Major U.S. stock indexes will make another attempt at reaching all-time records, but the fitful pace that has dominated trading is likely to continue. Next Friday's unemployment report and the hefty spending cuts that look like they about to take effect will be at the forefront.

The importance of whether equities can reach and sustain those highs is more than Wall Street's usual fixation on numbers with psychological significance. Breaking through to uncharted territory is seen as a test of investors' faith in the rally.

"It's very significant," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"The thinking is, there's just not enough there for an extended bull run," he said. "If we do break through (record highs), then maybe the charts and price action are telling us there's something better ahead."

Flare-ups in the euro zone's sovereign debt crisis and next Friday's report on the U.S. labor market could jostle the market, though U.S. job indicators have generally been trending in a positive direction.

Small- and mid-cap stocks hit lifetime highs in February. Now the Dow Jones industrial average <.dji> and the S&P 500 <.spx> are racing each other to the top. The Dow, made up of 30 stocks, is about 75 points - less than 1 percent - away from its record close of 14,164.53, which it hit on October 9, 2007. The broader S&P is still 3 percent away from its closing high of 1,565.15, also reached on October 9, 2007.

The advantage may be in the Dow's court. So far in 2013, it has gained 7.5 percent, beating the S&P 500 by about 1 percent.

THE RALLY AND THE REALITY CHECK

The Dow's relative strength owes much to its unique make-up and calculation, as well as to investors' recent preference for buying value stocks likely to generate steady reliable gains, rather than growth stocks.

But the more defensive stance illustrates how stock buyers are getting concerned about this year's rally. While investors don't want to miss out on gains, they're picking up companies that are less likely to decline as much as high-flying names - if a market correction comes.

The Russell Value Index <.rav> is up 7.6 percent for the year so far, outpacing the Russell Growth Index's <.rag> 5.7 percent rise. Within the realm of the S&P 500, the consumer staples sector led the market in February, gaining 3.1 percent.

There is some concern that growth-oriented names are being eclipsed by defensive bets, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

"This isn't a be-all and end-all sell signal by any means, but we would feel much more comfortable if some of the more aggressive areas, like technology and small caps, would start to gain some leadership here," Detrick said.

Signs that investors are becoming concerned about the rally's pace is evident in the options market, where the ratio of put activity to call activity has recently shifted in favor of puts, which represent expectations for a stock to fall.

"We are seeing some put hedging in the financials, building up for the past month," said Henry Schwartz, president of options analytics firm Trade Alert in New York.

The put-to-call ratio representing an aggregate of about 562 financial stocks is 1:1, when normally, calls should be outnumbering puts.

Investors have no shortage of reasons to crave the relative safety of blue chips and defensive stocks. Although markets have mostly looked past uncertainty over Washington's plans to cut the deficit, fiscal policy negotiations still pose a risk to equities.

The $85 billion in spending cuts set to begin on Friday is expected to slow economic growth this year if policymakers do not reach a new deal. Markets so far have held firm despite the wrangling in Washington, but tangible economic effects could pinch stock prices going forward.

The International Monetary Fund warned that full implementation of the cuts would probably take at least 0.5 percentage point off U.S. growth this year.

EASY MONEY AND TEPID HIRING

Investors will also take in a round of economic data at a time when concerns are percolating that the market is being pushed up less by fundamentals and more by loose monetary policy around the world.

The main economic event will be Friday's non-farm payrolls report for February. The U.S. economy is expected to have added 160,000 jobs last month, only a tad higher than in January, in a sign the labor market is healing at a slow pace. The U.S. unemployment rate is forecast to hold steady at 7.9 percent.

While lackluster data has been a catalyst in the past for stock market gains as investors bet it would ensure continued stimulus from the Federal Reserve, that sentiment may be wearing thin.

Markets stumbled last week following worries that the Fed might wind down its quantitative easing program sooner than expected.

"It shows the underpinning of the market is being driven at this point by monetary policy," Hellwig said.

With investors questioning what is behind the rally, it will make a run to record highs even more significant, Hellwig added.

"There's smart people that are in the bull camp and the bear camp and the muddle-through camp," Hellwig said. "The fact that you can statistically, using historical evidence, make a case for going higher, lower, or staying the same makes this number very important this time around."

(Wall St Week Ahead runs every Friday. Comments or questions on this column can be emailed to: leah.schnurr(at)thomsonreuters.com)

(Reporting by Leah Schnurr; Additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)

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U.S. evolves on same-sex marriage

STORY HIGHLIGHTS

• The president and the nation have shifted perspectives on same-sex marriage


• Supreme Court ruling on California's same-sex marriage ban a critical test


• Growing public support for gay marriage give proponents hope for change

Washington (CNN) -- The nation's growing acceptance of same-sex marriage has happened in slow and painstaking moves, eventually building into a momentum that is sweeping even the most unlikely of converts.

Even though he said in 2008 that he could only support civil unions for same-sex couples, President Barack Obama nonetheless enjoyed strong support among the gay community. He disappointed many with his conspicuously subdued first-term response to the same-sex marriage debate.

Last year, after Vice President Joe Biden announced his support, the president then said his position had evolved and he, too, supported same-sex marriage.

So it was no small matter when on Thursday the Obama administration formally expressed its support of same-sex marriage in a court brief weighing in on California's Proposition 8, which bans same-sex weddings. The administration's effort was matched by at least 100 high-profile Republicans — some of whom in elections past depended on gay marriage as a wedge issue guaranteed to rally the base — who signed onto a brief supporting gay couples to legally wed.

Obama on same-sex marriage: Everyone is equal

Then there are the polls that show that an increasing number of Americans now support same-sex marriage. These polls show that nearly half of the nation's Catholics and white, mainstream Protestants and more than half of the nation's women, liberals and political moderates all support same-sex marriage.

According to Pew Research Center polling, 48% of Americans support same-sex marriage with 43% opposed. Back in 2001, 57% opposed same-sex marriage while 35% supported it.

In last year's presidential election, same-sex marriage scarcely raised a ripple. That sea change is not lost on the president.

"The same evolution I've gone through is the same evolution the country as a whole has gone through," Obama told reporters on Friday.

Craig Rimmerman, professor of public policy and political science at Hobart and William Smith colleges says there is history at work here and the administration is wise to get on the right side.

"There is no doubt that President Obama's shifting position on Proposition 8 and same-sex marriage more broadly is due to his desire to situate himself on the right side of history with respect to the fight over same-sex marriage," said Rimmerman, author of "From Identity to Politics: The Lesbian and Gay Movements in the United States."

"I also think that broader changes in public opinion showing greater support for same-sex marriage, especially among young people, but in the country at large as well, has created a cultural context for Obama to alter his views."

For years, Obama had frustrated many in the gay community by not offering full-throated support of same-sex marriage. However, the president's revelation last year that conversations with his daughters and friends led him to change his mind gave many in that community hope.

Last year, the Obama administration criticized a measure in North Carolina that banned same-sex marriage and made civil unions illegal. The president took the same position on a similar Minnesota proposal.

Obama administration officials point to what they see as the administration's biggest accomplishment in the gay rights cause: repealing "don't ask, don't tell," the military's ban on openly gay and lesbian members serving in the forces.

Then there was the president's inaugural address which placed the gay community's struggle for equality alongside similar civil rights fights by women and African-Americans.

"Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law, for if we are truly created equal, then surely the love we commit to one another must be equal, as well," Obama said in his address after being sworn in.

In offering its support and asserting in the brief that "prejudice may not be the basis for differential treatment under the law," the Obama administration is setting up a high stakes political and constitutional showdown at the U.S. Supreme Court over a fast-evolving and contentious issue.

The justices will hear California's Proposition 8 case in March. That case and another appeal over the federal Defense of Marriage Act will produce blockbuster rulings from the justices in coming months.

Beyond the legal wranglings there is a strong social and historic component, one that has helped open the way for the administration to push what could prove to be a social issue that defines Obama's second term legacy, Rimmerman said.

The nation is redefining itself on this issue, as well.

Pew survey: Changing attitudes on gay marriage

The changes are due, in part, to generational shifts. Younger people show a higher level of support than their older peers, according to Pew polling "Millennials are almost twice as likely as the Silent Generation to support same-sex marriage."

"As people have grown up with people having the right to marry the generational momentum has been very, very strong," said Evan Wolfson, president of Freedom to Marry, a gay rights organization.

That is not to say that there isn't still opposition.

Pew polling found that most Republicans and conservatives remain opposed to same-sex marriage. In 2001, 21% of Republicans were supportive; in 2012 that number nudged slightly to 25%.

Conservative groups expressed dismay at the administration's same-sex marriage support.

"President Obama, who was against same-sex 'marriage' before he was for it, and his administration, which said the Defense of Marriage Act was constitutional before they said it was unconstitutional, has now flip-flopped again on the issue of same-sex 'marriage,' putting allegiance to extreme liberal social policies ahead of constitutional principle," Family Research Council President Tony Perkins said in a statement.

But there are signs of movement even among some high profile Republican leaders

Top Republicans sign brief supporting same-sex marriage

The Republican-penned friend of the court brief, which is designed to influence conservative justices on the high court, includes a number of top officials from the George W. Bush administration, Mitt Romney's former campaign manager and former GOP presidential candidate Jon Huntsman.

It is also at odds with the Republican Party's platform, which opposes same-sex marriage and defines marriage as a union between a man and a woman.

Still, with White House and high-profile Republican support, legal and legislative victories in a number of states and polls that show an increasing number of Americans support same sex-marriage, proponents feel that the winds of history are with them.

"What we've seen is accelerating and irrefutable momentum as Americans have come to understand who gay people are and why marriage matters," Wolfson said. "We now have a solid national majority and growing support across every demographic. We have leaders across the spectrum, including Republicans, all saying it's time to end marriage discrimination."

CNN's Peter Hamby, Ashley Killough and Bill Mears contributed to this report.

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Officials: Florida sinkhole still growing; man missing

A central Florida man was still missing and feared dead early today after a sinkhole opened under his home Thursday night, swallowing him in his bed.

As hours passed overnight and rescuers and family lost hope of seeing 36-year-old Jeff Bush pulled from the ground alive, the sinkhole continued to grow, officials said.

“The hole has gotten deeper,” geotechnical engineer Larry Madrid said at a news conference Friday evening. “We can’t get into the building because of the potential for sudden collapse.”

The continued instability of the ground slowed engineers and kept evacuees in the Tampa-area neighborhood from returning to their homes.

“We’re really handicapped and paralyzed, and we really can’t do a whole lot more than wait,” Madrid said.

“I know in my heart he's dead,” Bush’s brother Jeremy told reporters Friday.

Authorities condemned the concrete-block home, determining the ground was unstable. Surrounding homes were evacuated, but the hole is isolated to the house, authorities said.

Hillsborough Fire Rescue officials lowered a camera and listening device into the 20-foot-deep hole to try to find Jeffrey Bush. But the ground kept moving and they lost the equipment.

"He's down there, but we can't hear here anything and we can't see anything," said Ronnie Rivera, a Hillsborough County Fire Rescue spokesman. "We just can't do anything."

Structural engineers brought in equipment to determine if rescuers can enter the house. But with each hour that passed, the hope for rescue faded and despair set in.

Late Thursday night, Jeremy Bush heard something that sounded like a car crash, then heard a scream. He ran to his brother’s room, but all he could see was a mattress. He tried to save him and ended up getting stuck himself.

When Hillsborough County sheriff’s deputy Douglas Duvall arrived at the home, he yanked Jeremy Bush from the hole and the two were able to escape.

At the news conference Friday evening, Duvall said he couldn’t sleep Thursday night, thinking about the what he’d seen and about Bush's family.

The risk of sinkholes is common in Florida due to the state's porous geological bedrock, according to the Florida Department of Environmental Protection. As rainwater filters down into the ground, it dissolves the rock causing erosion that can lead to underground caverns, which cause sinkholes when they collapse.

Florida suffered one of its worst sinkhole accidents in 1994 when a 15-story-deep chasm opened up east of Tampa at a phosphate mine. It created a hole 185 feet deep and as much as 160 feet wide. Locals dubbed it Disney World's newest attraction - 'Journey to the Center of the Earth.'

In 1981 in Winter Park near Orlando, a sinkhole was measured as 320 feet wide and 90 feet deep, swallowing a two-story house, part of a Porsche dealership, and an Olympic-size swimming pool. The site is now an artificial lake in the city.

From the Los Angeles Times, Reuters and the Orlando Sentinel

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Syria war is everybody's problem

Syrians search for survivors and bodies after the Syrian regime attacked the city of Aleppo with missiles on February 23.

STORY HIGHLIGHTS

• Frida Ghitis: We are standing by as Syria rips itself apart, thinking it's not our problem


• Beyond the tragedy in human terms, she says, the war damages global stability


• Ghitis: Syria getting more and more radical, jeopardizing forces of democracy


• Ghitis: Peace counts on moderates, whom we must back with diplomacy, training arms

Editor's note: Frida Ghitis is a world affairs columnist for The Miami Herald and World Politics Review. A former CNN producer and correspondent, she is the author of "The End of Revolution: A Changing World in the Age of Live Television." Follow her on Twitter: @FridaGColumns

(CNN) -- Last week, a huge explosion rocked the Syrian capital of Damascus, killing more than 50 people and injuring hundreds. The victims of the blast in a busy downtown street were mostly civilians, including schoolchildren. Each side in the Syrian civil war blamed the other.

In the northern city of Aleppo, about 58 people -- 36 of them children -- died in a missile attack last week. Washington condemned the regime of Bashar al-Assad; the world looked at the awful images and moved on.

Syria is ripping itself to pieces. The extent of human suffering is beyond comprehension. That alone should be reason enough to encourage a determined effort to bring this conflict to a quick resolution. But if humanitarian reasons were not enough, the international community -- including the U.S. and its allies -- should weigh the potential implications of allowing this calamity to continue.

Frida Ghitis

We've all heard the argument: It's not our problem. We're not the world's policeman. We would only make it worse.

This is not a plea to send American or European troops to fight in this conflict. Nobody wants that.

But before we allow this mostly hands-off approach to continue, we would do well to consider the potential toll of continuing with a failed policy, one that has focused in vain over the past two years searching for a diplomatic solution.

U. S. Secretary of State John Kerry has just announced that the U.S. will provide an additional $60 million in non-lethal assistance to the opposition. He has hinted that President Obama, after rejecting suggestions from the CIA and previous Secretary of State Hillary Clinton to arm Syrian rebels, might be ready to change course. And not a day too soon.

The war is taking longer than anyone expected. The longer it lasts, the more Syria is radicalized and the region is destabilized.

If you think the Syrian war is the concern of Syrians alone, think about other countries that have torn themselves apart over a long time. Consider Lebanon, Afghanistan or Somalia; each with unique circumstances, but with one thing in common: Their wars created enormous suffering at home, and the destructiveness eventually spilled beyond their borders. All of those wars triggered lengthy, costly refugee crises. They all spawned international terrorism and eventually direct international -- including U.S. -- intervention.

The uprising against al-Assad started two years ago in the spirit of what was then referred to -- without a hint of irony -- as the Arab Spring. Young Syrians marched, chanting for freedom and democracy. The ideals of equality, rule of law and human rights wafted in the air.

Al-Assad responded to peaceful protests with gunfire. Syrians started dying by the hundreds each day. Gradually the nonviolent protesters started fighting back. Members of the Syrian army started defecting.

The opposition's Free Syrian Army came together. Factions within the Syrian opposition took up arms and the political contest became a brutal civil war. The death toll has climbed to as many as 90,000, according to Kerry. About 2 million people have left their homes, and the killing continues with no end in sight.

In fairness to Washington, Europe and the rest of the international community, there were never easy choices in this war. Opposition leaders bickered, and their clashing views scared away would-be supporters. Western nations rejected the idea of arming the opposition, saying Syria already has too many weapons. They were also concerned about who would control the weaponry, including an existing arsenal of chemical and biological weapons, after al-Assad's fall.

These are all legitimate concerns. But inaction is producing the worst possible outcome.

The moderates, whose views most closely align with the West, are losing out to the better-armed Islamists and, especially, to the extremists. Moderates are losing the ideological debate and the battle for the future character of a Syria after al-Assad.

Radical Islamist groups have taken the lead. Young people are losing faith in moderation, lured by disciplined, devout extremists. Reporters on the ground have seen young democracy advocates turn into fervent supporters of dangerous groups such as the Nusra Front, which has scored impressive victories.

The U.S. State Department recently listed the Nusra Front, which has close ties to al Qaeda in Iraq and a strong anti-Western ideology, as a terrorist organization.

Meantime, countries bordering Syria are experiencing repercussions. And these are likely to become more dangerous.

Jordan, an important American ally, is struggling with a flood of refugees, as many as 10,000 each week since the start of the year. The government estimates 380,000 Syrians are in Jordan, a country whose government is under pressure from its own restive population and still dealing with huge refugee populations from other wars.

Turkey is also burdened with hundreds of thousands of refugees and occasional Syrian fire. Israel has warned about chemical weapons transfers from al-Assad to Hezbollah in Lebanon and may have already fired on a Syrian convoy attempting the move.

Lebanon, always perched precariously on the edge of crisis, lives with growing fears that Syria's war will enter its borders. Despite denials, there is evidence that Lebanon's Hezbollah, a close ally of al-Assad and of Iran, has joined the fighting on the side of the Syrian president. The Free Syrian Army has threatened to attack Hezbollah in Lebanon if it doesn't leave Syria.

The possible outcomes in Syria include the emergence of a failed state, stirring unrest throughout the region. If al-Assad wins, Syria will become an even more repressive country.

Al-Assad's survival would fortify Iran and Hezbollah and other anti-Western forces. If the extremists inside the opposition win, Syria could see factional fighting for many years, followed by anti-democratic, anti-Western policies.

The only good outcome is victory for the opposition's moderate forces. They may not be easy to identify with complete certainty. But to the extent that it is possible, these forces need Western support.

They need training, funding, careful arming and strong political and diplomatic backing. The people of Syria should know that support for human rights, democracy and pluralism will lead toward a peaceful, prosperous future.

Democratic nations should not avert their eyes from the killings in Syria which are, after all, a warning to the world.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Frida Ghitis.

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Chicago State board meets to decide: Who's in charge?

Chicago State University's board of trustees is meeting this morning to settle the question of who is president at the South Side campus, capping a tumultuous week.

On Monday, the board announced that Wayne Watson, president since 2009, would take a yearlong sabbatical and then was expected to retire. It also said that provost Sandra Westbrooks would be the acting president.

But Watson stayed in his office this week and has maintained that he is still the president. Watson’s attorney said he viewed the sabbatical as equivalent to a vacation, not an end to his presidency. Watson’s contract goes until 2014.

The sabbatical arrangement, which Watson requested, was intended to allow him to exit without drama after the trustees decided they wanted new leadership. He was to be paid his $250,000 salary during the sabbatical, during which time he said he planned to care for his elderly father and conduct research on effective leadership at minority-serving institutions.

The board called the meeting to order shortly after 8 a.m. this morning and then recessed into a closed executive session to discuss what was described on the published agenda as employment matters, legal matters and approval of legal and consultant services. It is then expected to reconvene in an open session.

Before the meeting began, Chicago leaders well known in the African-American community crowded into the library waiting area, including former Sen. Emil Jones and Jonathan Jackson from Rainbow Push Coalition.

Jones, who walked the room with Watson, said: “He should be president, no question about that, because of his interest in the education of the students who go here.”

The mood among the crowd was pleasant despite the differences in opinion on how the university should be lead.

"We're on the good side," said Victor P. Henderson, Watson's attorney.

Watson said: "I'm standing for the right thing."

Board Chairman Gary Rozier told the Tribune earlier this week that trustees had decided it was “time to look for new leadership.” They were disappointed with the decline in enrollment and the faculty’s no-confidence vote on Watson.

Henderson has defended Watson’s tenure.

“I have not seen one iota of information which would justify changing the president’s status at the university,” Henderson said earlier this week.

As the board met in private, members of the audience milled around the room, some complaining out loud about the credentials of the board members and saying that they lacked qualifications to select a leader for the institution. Some whispered about rumors and gossip that has spread across the campus and distracted the faculty, staff and students.

Martin L. King, chairman of the Rainbow Push Coalition board, said he and Rev. Jesse Jackson tried to mediate an agreement between Watson and the board but failed.

"That agreement would have ended the need to have this meeting," he said.

Chicago State has long been an source of pride in the middle-class African-American community it sits in. The student body is made up mainly of local black students, who otherwise might not have a chance to earn a college degree.

Friday's meeting drew residents who had graduated from the institution and many that work there.

"Chicago State University is an anchor for Chatham, Auburn Gresham and the Southland," King said. "It's an economic anchor, the home of historic documents. This university is a place where we all come together."

King said he believes it is in the best interest of the students and community that Watson be retained and the board work with him.

"The president has been very instrumental in making sure the university moved forward," King said. "Our (PUSH) ultimate goal is fairness."

On campus, the drama between Watson and the board has seeped into the classroom, said adjunct professor of political science Gideon Charles.

"We're demoralized. We don't know who is the President and who to report to," he said.

Charles said he believes it's time for Watson to be replaced.

"The school has declined under his leadership and enrollment is down," he said. "The faculty don't hold him in high regard. When he was brought in in 2009, the students didn't take a liking to him — and they still don't."

History professor Bob Bionaz also said he believes Watson should be replaced.  "He is a failure" he said, citing a decline in student enrollment and other factors.

Earlier this week, Watson sent a letter to trustees alleging that some board members are retaliating against him because he won’t accede to their pressures to hire and reward their friends.

In a four-page letter dated Feb. 26 and obtained by the Tribune, Watson told trustees that the “real motivation” behind the board’s efforts to replace him was his refusal “to capitulate to the incessant requests” from Rozier and Vice Chairman Z. Scott to “either hire, promote or give salary increases to their friends and associates.”

Langdon Neal, the board’s attorney, replied: “We are going to rise above this and deal with the matters that affect the students of the university and the university itself. We are not going to comment on the personal accusations.”

In the letter to trustees, Watson also wrote that there are now no financial improprieties at an institution that was plagued by fiscal mismanagement for years.

jscohen@tribune.com

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Kerry to chide Turkish PM over Zionism comments

ANKARA (Reuters) - Secretary of State John Kerry is expected to take Turkey's prime minister to task for describing Zionism as a crime against humanity, an attack on a key U.S. ally that has overshadowed their talks on the crisis in neighboring Syria.

Kerry, on his first trip to a Muslim nation since taking office, is meeting Turkish leaders for talks meant to focus on Syria's civil war and bilateral interests from energy security to counter-terrorism.

But comment by Turkish Prime Minister Tayyip Erdogan at a U.N. meeting in Vienna this week, condemned by his Israeli counterpart, the White House and U.N. Secretary-General Ban Ki-moon, has clouded his trip.

"This was particularly offensive, frankly, to call Zionism a crime against humanity ... It does have a corrosive effect (on relations)," a senior U.S. official told reporters as Kerry flew to Ankara.

"I am sure the secretary will be very clear about how dismayed we were to hear it," the official, who spoke on condition of anonymity, said.

"To state the obvious, it complicates our ability to do all of the things that we want to do together when we have such a profound disagreement about such an important thing."

Washington needs all the allies it can get as it navigates the political currents of the Middle East, and sees Turkey as the key player in supporting Syria's opposition and planning for the era after President Bashar al-Assad.

But the collapse of Ankara's ties with Israel have undermined U.S. hopes that Turkey could play a role as a broker in the broader region.

"The Turkey-Israel relationship is frozen," the U.S. official said. "We want to see a normalization ... not just for the sake of the two countries but for the sake of the region and, frankly, for the symbolism," he said.

"Not that long ago (you) had these two countries demonstrating that a majority Muslim country could have very positive and strong relations with the Jewish state and that was a sign for the region (of what was) possible."

Erdogan told the U.N. Alliance of Civilizations meeting in Vienna on Wednesday: "Just as with Zionism, anti-Semitism and fascism, it has become necessary to view Islamophobia as a crime against humanity."

Erdogan's caustic rhetoric on Israel has won applause from conservative supporters at home but raised increasing concern among Western allies.

"Erdogan's comments about Israel have become progressively more worrying," said Moshe Kantor, President of the European Jewish Congress. "This type of rhetoric is pushing Turkey further away from the West and Europe and closer to Iran."

Ties between Israel and mostly Muslim Turkey have been frosty since 2010, when Israeli marines killed nine Turks in fighting aboard a Palestinian aid ship that tried to breach Israel's blockade of the Gaza Strip.

In recent weeks, there has been a run of reports in the Turkish and Israeli media about efforts to repair relations, including a senior diplomatic meeting last month in Rome and military equipment transfers.

The reports have not been confirmed by either government.

SUPPORT FOR SYRIAN OPPOSITION

Turkey's relations with the United States have always been prickly, driven more by a mutual need for intelligence than any deep cultural affinity. And Erdogan's populist rhetoric, sometimes at apparent odds with U.S. interests, is aimed partly at a domestic audience wary of Washington's influence.

But the two have strong common interests. Officials said Syria would top the agenda in Kerry's meetings with Erdogan and President Abdullah Gul, building on the discussions in Rome between 11 mostly European and Arab nations within the "Friends of Syria" group.

After the Rome meeting, Kerry said on Thursday the United States would for the first time give non-lethal aid to the rebels and more than double support to the civilian opposition, although Western powers stopped short of pledging arms.

"We need to continue the discussion which took place in Rome ... in terms of the main goals there is no daylight between us and the Americans," a senior Turkish official said.

"A broad agreement was reached on supporting the opposition. Now our sides need to sit down and really flesh out what we can do to support them in order to change the balance on the ground," he said.

Turkey has been one of Assad's fiercest critics, hosting a NATO Patriot missile defense system, including two U.S. batteries, to protect against a spillover of violence and leading calls for international intervention.

It has spent more than $600 million sheltering refugees from the conflict that began almost two years ago, housing some 180,000 in camps near the border and tens of thousands more who are staying with relatives or in private accommodation.

Washington has given $385 million in humanitarian aid for Syria but U.S. President Barack Obama has so far refused to give arms, arguing it is difficult to prevent them from falling into the hands of militants who could use them on Western targets.

Turkey, too, has been reluctant to provide weapons, fearing direct intervention could cause the conflict to spill across its borders.

(Writing by Nick Tattersall; Editing by Jon Boyle)

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