AP Source: Hernandez on verge of new deal with M's

SEATTLE (AP) — Felix Hernandez and the Seattle Mariners are working on a $175 million, seven-year contract that would make him the highest-paid pitcher in baseball, according to a person with knowledge of the deal's details.

The person spoke to The Associated Press Thursday on condition of anonymity because the agreement has not been completed. USA Today first reported the deal.

Seattle would add $134.5 million of guaranteed money over five years to the contract of the 2010 AL Cy Young Award winner, whose current agreement calls for him to receive $40.5 million over the next two seasons.

Hernandez's total dollars would top CC Sabathia's original $161 million, seven-year contract with the New York Yankees and his $25 million average would surpass Zack Greinke's $24.5 million under his new contract with the Los Angeles Dodgers and tie him for the second-highest in baseball with Josh Hamilton and Ryan Howard behind Alex Rodriguez ($27.5 million). Hernandez's new money would average $26.9 million over five years.

Hernandez agreed to a $78 million, five-year contract in January 2010 and has earned an additional $2.5 million in escalators and $300,000 in bonuses. He is due $20 million this year and $20.5 million in 2014, which would be superseded by the new deal.

Seattle general manager Jack Zduriencik said he could not comment when reached on Thursday, and Hernandez's representatives didn't immediately return messages.

If the deal is finalized, it would leave Detroit's Justin Verlander and the Dodgers' Clayton Kershaw as the most attractive pitchers eligible for free agency after the 2014 season. Tampa Bay's David Price is eligible after the 2015 season.

Hernandez has become the face of Seattle's struggling franchise, transforming from a curly haired 19-year-old who wore his hat crooked to one of the most dominant and exciting pitchers in baseball. Known as "King Felix," he became the first Seattle pitcher to throw a perfect game in a 1-0 win over Tampa Bay last August.

His fiery enthusiasm on the mound and his willingness to first sign a long-term deal in 2010 have endeared him to fans in the Pacific Northwest who have gone more than a decade without seeing postseason baseball.

Hernandez, who will turn 27 on April 8, is 98-76 with a 3.22 ERA in eight seasons with the Mariners. He won a career-high 19 games in 2009 when he finished second in the Cy Young voting then won the award a year later when he went just 13-12 but had a 2.27 ERA and 232 strikeouts.

Hernandez appeared to be making another Cy Young push last year before going 0-4 in his last six starts, which left him at 13-9 with 223 strikeouts.

His career record would be even better if he didn't play with one of baseball's worst offenses. Seattle had the lowest batting average in the major leagues in each of the last three seasons. Hernandez has taken 10 losses during that span when he's given up two earned runs or less.

For his career, Hernandez has allowed two earned runs or less in 141 of 238 starts, but the team is only 99-42 in those games due to the offensive problems.

Locking up Hernandez long-term won't solve all of the problems that have left Seattle looking up at Texas, Oakland and the Los Angeles Angles in the AL West for most of the last 10 years. The Mariners have tried to address some of those issues this offseason by trading for Kendrys Morales and Michael Morse to provide more punch to go along with young prospects Dustin Ackley, Kyle Seager and Jesus Montero, who have all shown flashes early in their careers.

But should the deal be finalized, the Mariners at least have the security of knowing who'll be at the top of their rotation for most of this decade.

___

AP Sports Writer Ronald Blum contributed to this report.

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Gun violence plans: What's in the works

STORY HIGHLIGHTS

• Connecticut school massacre prompts a number of proposals in Washington aimed at curbing gun violence


• They include a ban on assault weapons that insiders say has little chance of getting through Congress


• Some bipartisan support for proposals to expand background checks around gun purchases

Washington (CNN) -- December's school massacre in Newtown, Connecticut, has prompted congressional lawmakers and the White House to offer a number of proposals aimed at curbing gun violence.

Here are some of the measures garnering the most attention:

The White House plan

President Barack Obama signed 23 executive actions, which don't require congressional approval, to strengthen existing gun laws and take related steps on mental health and school safety.

He has also called on Congress to reinstate the Clinton-era assault weapons ban that expired in 2004, to restrict ammunition magazines to no more than 10 rounds, and to expand background checks to anyone buying a gun, whether at a store or in a private sale at an auction or convention.

Assault weapons ban revisited

A proposal by Sen. Diane Feinstein, D-California, would not ban ownership of assault weapons outright, but would prohibit new ones from being manufactured, sold or imported. It would also outlaw ammunition magazines that hold more than 10 rounds.

She said the goal is to "dry up the supply of these weapons over time." The measure, along with a companion bill in the House, is opposed by the nation's powerful gun lobby, led by the National Rifle Association.

Cracking down on straw purchases

Vermont Democrat Sen. Patrick Leahy, chairman of the Senate Judiciary Committee, has called for stronger background checks and a crackdown on so-called straw purchases, in which people who can pass background checks buy weapons for others. Leahy has proposed a measure to increase penalties for straw purchasers.

Curbing gun trafficking

A new House bipartisan gun control bill seeks to make gun trafficking a federal crime. It has some bipartisan support and mirrors a measure proposed in the Senate.

House Democratic efforts

A group of House Democrats, who were part of the chamber's Democratic Gun Violence Prevention Task Force, unveiled 15 proposals to address gun violence. The measures largely echoed those previously backed by the White House.

The package is similar to other Democratic measures that would address background checks, ban high capacity magazines, and crack down on gun trafficking.

House Majority Leader Eric Cantor, R-Viginia, told CNN that he supports beefed up background checks for gun sales.

Closing gun show loophole

A group of four senators working behind the scenes on a bipartisan bill to expand background checks on gun sales is making significant progress, according to sources in both parties familiar with their work.

The group includes Sen. Tom Coburn, R-Oklahoma, who has an A rating with the National Rifle Association, and Sen. Joe Manchin, D-West Virginia, a long time advocate of gun rights.

The legislation would effectively require background checks on private gun purchases made with non-licensed gun dealers, according to sources in both parties. That would include closing the so-called gun show loophole.

Political play

House Speaker John Boehner has said he has no plans to bring any measure up for a vote until the Senate acts first.

Republicans oppose any assault weapons ban and rural-state Democrats facing tough re-election fights are unlikely to support it as well, meaning that proposal has little chance of passing Congress.

There is some bipartisan support for expanded background checks, especially to keep guns out of the hands of people with mental illness. A number of lawmakers may also support limiting the size of ammunition magazines.

Some lawmakers have said that various gun proposals may be addressed in separate bills, rather than a comprehensive package, which could more easily be targeted by opponents.

The top Democrat in Congress, Senate Majority Leader Harry Reid of Nevada, has a good rating from gun rights groups and has said he would work to ensure that a variety of proposals are brought to the floor for consideration.

He opposed the 1994 assault weapons ban and has indicated support for expanding background checks but refuses to endorse a new weapons prohibition.

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Blizzard begins to slam Northeast

A blizzard blew into the Northeast on Friday, cutting short the workweek for millions who feared being stranded as state officials ordered roads closed ahead of what could be record-setting snowfall.

Authorities scrambled to prepare for the storm, which had already resulted in a massive traffic pile-up in southern Maine and prompted organizers of the nation's sledding championship in Maine to postpone a race scheduled for Saturday, fearing too much snow for the competition.

From New York to Maine, the storm began gently, dropping a light dusting of snow, but officials urged residents to stay home, rather than risk getting stuck in deep drifts when the storm kicks up later Friday afternoon.

Even in its early stages, the storm created some panic. Drivers lined up at gas stations to top off their tanks, grocery stores were swamped as shoppers stocked up on bread and milk, and travelers were forced to confront flight delays and cancellations.

With the worst of the storm yet to come, the governors of Massachusetts, Rhode Island and Connecticut declared states of emergency and issued bans on driving by early Friday afternoon.

“The rate of snowfall and reduced visibility during the evening rush hour in particular will make safe travel nearly impossible,” Massachusetts Governor Deval Patrick told reporters.

The early edge of the storm led to a 19-vehicle pile-up in southern Maine, snarling traffic on a major interstate highway north of Portland. No major injuries were reported. A smaller accident briefly closed an interstate near Bolton, Vermont.

“It was close to whiteout conditions, it's sort of a precursor of what's coming later,” said Stephen McCausland, a spokesman for the Maine State Police.

Officials across the region closed schools and more than 3,000 flights were canceled. Several thousand customers lost power in New Jersey and points south, though officials warned the number was likely to rise as the snowfall got heavier and winds picked up.

Governors and mayors ordered nonessential government workers to stay home, urged private employers to do the same, told people to prepare for power outages and encouraged them to check on elderly or disabled neighbors.

The light snow falling across much of New England on Friday morning was a taste of the weather to come, said Jerry Paul, senior meteorologist with Weather Insight, a unit of Thomson Reuters.

“That's going to be gradually building today as time goes on,” Paul said.

A wide swath of New England, including northeastern Connecticut, Providence, Rhode Island, and the Boston area, will likely see 24 inches to 30 inches of snow, with some areas seeing more than three feet by the time the storm ends on Saturday morning, Paul added.

At the storm's peak, winds could gust up to 65 miles per hour, he said.

Boston's record snowfall, 27.6 inches, came in 2003.

CHEERING ON STORM

Organizers of the country's championship sledding race, that had been scheduled to get underway in Camden, Maine, on Saturday, postponed the event by one day.

“As soon as the weather clears on Saturday and it is safe, the toboggan committee will be out at Tobagganville cleaning up the chute as quickly as they can,” said Holly Edwards, chairman of the U.S. National Toboggan Championships. “It needs to be shoveled out by hand.”

Some 400 teams were registered for the race, which features costumed sledders on a 400-foot  chute.

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China, Japan engage in new invective over disputed isles

BEIJING (Reuters) - China and Japan engaged on Friday in a fresh round of invective over military movements near a disputed group of uninhabited islands, fuelling tension that for months has bedeviled relations between the Asian powers.

An increasingly muscular China has been repeatedly at odds with others in the region over rival claims to small clusters of islands, most recently with fellow economic giant Japan which accused a Chinese navy vessel of locking radar normally used to aim weapons on a Japanese naval ship in the East China Sea.

China's Defence Ministry rejected Japan's complaint about the radar, its first comment on the January 30 incident. It said Japan's intrusive tracking of Chinese vessels was the "root cause" of the renewed tension.

A Japanese official dismissed the Chinese explanation for incident saying China's actions could be dangerous in the waters around the islets, known as Diaoyu in China and Senkaku in Japan, believed to be rich in oil and gas.

Japanese Prime Minister Shinzo Abe led his conservative party to a landslide election victory in December, promising to beef up the military and stand tough in territorial disputes.

On Thursday, another border problem was brought into focus when Japan said two Russian fighter jets briefly entered its air space near long-disputed northern islands, prompting Japan to scramble combat fighters. Russia denied the accusation.

The commander of U.S. forces in the Asia-Pacific said the squabble between Japan and China underlined the pressing need for rules to prevent such incidents turning into serious conflict.

"What we need in the South China Sea is a mechanism that prevents us turning our diplomacy over to young majors and young (naval) commanders ... to make decisions at sea that cause a problem (that escalates) into a military conflict that we might not be able to control," Admiral Samuel Locklear told a conference in the Indonesian capital.

China is in dispute with several Southeast Asian countries including the Philippines and Vietnam over parts of the South China Sea, which is potentially rich in natural resources.

Locklear said governments and their leaders had to understand the potential for things to get out of hand.

"In this case, I think that point has been made pretty clear," he said in reference to international reaction to the dispute between China and Japan.

"IRRESPONSIBLE"

China's Defence Ministry, in a faxed statement late on Thursday, said Japan's complaints did not "match the facts". The Chinese ship's radar, it said, had maintained regular alerting operations and the ship "did not use fire control radar".

The ministry said the Chinese ship was tracked by a Japanese destroyer during routine training exercises. Fire control radar pinpoints the location of a target for missiles or shells and its use can be considered a step short of actual firing.

Japan, the ministry said, had "made irresponsible remarks that hyped up a so-called China threat, recklessly created tension and misled international public opinion".

"Japanese warships and airplanes have often conducted long periods of close-range tracking and surveillance of China's naval ships and airplanes," the Chinese Defence Ministry said.

"This is the root cause of air and maritime security issues between China and Japan."

In Tokyo, Japan's Chief Cabinet Secretary Yoshihide Suga told a news conference Japan could not accept China's explanation and Japan's accusation came after careful analysis.

"We urge China to take sincere measures to prevent dangerous actions which could cause a contingency situation," Suga said.

Japanese Defence Minister Itsunori Onodera said this week that the radar incident could have become very dangerous very quickly, and it could have been seen as a threat of military force under U.N. rules.

Hopes had been rising recently for an easing of the tension, which was sparked, in part, by Japan's nationalization of three of the privately owned islets last September.

Fears that encounters between aircraft and ships could bring an unintended clash have given impetus to efforts to improve links, including a possible summit between Abe and Chinese leader Xi Jinping, who takes over as head of state in March.

(Additional reporting by Linda Sieg in TOKYO, Joathan Thatcher in JAKARTA; Editing by Ron Popeski and Robert Birsel)

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Wall Street falters on euro zone jitters

LOS ANGELES (TheWrap.com) - "The Avengers," or at least most of the members of the world-saving crew, will assemble on the stage of this year's Academy Awards. Castmates Robert Downey Jr., Chris Evans, Samuel L. Jackson, Jeremy Renner and Mark Ruffalo will present an Oscar together, show producers Craig Zadan and Neil Meron announced Wednesday. Missing in action are Scarlett Johansson, who played Black Widow but is currently starring in a revival of "Cat on a Hot Tin Roof" on Broadway, and Chris Hemsworth, who plays Thor. ...

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Armstrong sued for $12 million bonus

AUSTIN, Texas (AP) — A Dallas promotions company sued Lance Armstrong on Thursday, demanding he repay $12 million in bonuses and fees it paid him for winning the Tour de France.

SCA Promotions had tried in a 2005 legal dispute to prove Armstrong cheated to win before it ultimately settled and paid him.

Armstrong recently acknowledged using performance-enhancing drugs, and the U.S. Anti-Doping Agency in 2012 detailed a sophisticated doping program by his Armstrong's teams. Armstrong was stripped of his seven Tour de France victories and given a lifetime ban from sports.

Now, the company contends in its lawsuit, Armstrong and agent Bill Stapleton conspired to cheat SCA out of millions. The lawsuit notes that Armstrong repeatedly testified under oath in the 2005 dispute that he did not use steroids, other drugs or blood doping methods to win, all of which he now admits to doing.

"It is time now for Mr. Armstrong to face the consequences of his actions," the lawsuit said. "He admits he doped; he admits he bullied people; he admits he lied."

The lawsuit names Armstrong, Stapleton and Tailwind Sports, Inc., the team's management entity, as defendants.

Tim Herman, an attorney for Armstrong and Stapleton, did not immediately return telephone messages. Herman has previously noted that SCA previously settled its case with Armstrong and said it should not be allowed to reopen the matter.

SCA's lawsuit counters that the case was settled only after Armstrong's lies under oath prevented it from proving he doped.

The lawsuit seeks to recover $9.5 million in bonus money and another $2.5 million paid to Armstrong for other costs and fees.

Separately, USADA chief executive Travis Tygart said Wednesday the agency has been in contact with him Armstrong and is giving him more time to decide if he wants to cooperate with its investigators and tell more about what he knows of doping in cycling.

USADA extended its original Wednesday deadline to Feb. 20 to work out an interview with investigators under oath.

Just two weeks ago, Herman had strongly suggested Armstrong would not be interested in talking with USADA investigators. Tygart said it was Armstrong who asked for more time.

"We understand that he does want to be part of the solution and assist in the effort to clean up the sport of cycling," Tygart said in a statement. "We have agreed to his request for an additional two weeks to work on details to hopefully allow for this to happen."

The agency has said cooperating in its cleanup effort is the only path open to Armstrong if his lifetime ban from sports is to be reduced.

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Bring drones out of the shadows?

STORY HIGHLIGHTS

• John Brennan's confirmation hearing is a chance to ask about drone program, author says


• Sarah Holewinski: Brennan is one of a few officials who knows full story on drones


• She says senators need to ask about damage drone program does to civilians, U.S. reputation


• Holewinski: CIA should hand over drone program to Defense Department

Editor's note: Sarah Holewinski is executive director of the Center for Civilians in Conflict, which advocates protections for civilians affected by armed conflict. She was a member of the White House AIDS policy team in President Bill Clinton's second term.

(CNN) -- The president's pick for CIA director -- John Brennan -- is one of a handful of U.S. officials who understands America's covert drone campaign inside and out.

Nearly everyone else is in the dark about the whos, wheres and whys of the program, including most members of Congress. But Brennan is also one of the few U.S. officials who's stood in front of a public audience and tried to explain the targeting of terrorists outside recognized battlefields. And while overseeing a massive use of lethal force, Brennan is also known inside the administration as a moderating voice in the fight against terrorism.

Sarah Holewinski

The fact is, Brennan's personal views are as opaque as the drone campaign itself. He may assume leadership of the CIA and decide a clandestine agency should not conduct what is an obvious military operation (a stance I and many others would fully support); after all, a veteran of the CIA may believe the agency should get back to gritty intelligence gathering.

CNN Explains: U.S. drones

Or, maybe Brennan believes that when it comes to the fight against al Qaeda, the public and its Congress should trust the executive office to protect the American people by whatever means it sees fit.

One way or the other, this week's Senate confirmation hearings should be an opportunity to bring Brennan's views out of the shadows, along with the basic attributes and justifications of the covert drone campaign. The man, the machine and the policy are inextricably linked.

Bergen: John Brennan, America's drone warrior

U.S. officials have consistently claimed that offering too many details about the covert drone program could threaten national security. Fair enough; some classification for national security is understandable. But the secrecy surrounding covert drone use is unduly excessive and not in keeping with the transparent government President Barack Obama promised.

Since the bulk of Brennan's hearing will be behind closed doors, the Senate Select Committee on Intelligence has no reason to shy away from asking tough questions about the drone program. It matters that Congress is there to represent the American people. On their behalf, Congress has a duty to ensure the use of lethal force beyond our borders is being considered and carried out responsibly, with due consideration for the harm it may inflict on civilian populations.

Talk Back: Should U.S. be able to kill American terrorist suspects without trial?

Senators might ask a very basic question to Brennan, one that is seldom clearly answered by the administration: "What impact is the drone campaign against al Qaeda and its associates having?"

John Brennan, President Barack Obama's choice for CIA director, has been deeply involved in the U.S. drone program.

This is a fundamental question of accountability any U.S. official involved in setting or carrying out counterterrorism policy should be able to answer. That answer may describe a dwindling kill list, but it must also put forward facts about what impact drones are having on civilians living under them.

U.S. armed forces in Afghanistan and Iraq learned that the positive or negative impacts of an operation on the local population are an important metric of mission effectiveness. Commanders worked hard to reverse anti-American sentiment caused by a seemingly callous U.S. attitude toward civilian deaths and injuries. In the case of counterterrorism operations, palpable anger toward America would be antithetical to the goal of decreasing the number of terrorists and those who support their cause.

As it stands, it's unclear whether anyone, including Brennan, knows what negative consequences are emerging on the ground because of remote drones.

Rather, claims of low civilian casualties and drone precision capabilities paint a picture of extreme effectiveness in taking out terrorists while sparing civilians. It's true that a drone is precise, meaning it will hit what it is aimed at -- a building, a bunker or a person. But there are valid concerns about whether the target hit is the right one.

Opinion: When are drone killings illegal?

Remote drones likely rely on sources that may be questionable such as video and cell phone intercepts to identify a target. Civilians may be mistakenly targeted as combatants and counted as such because there are no ground troops to conduct a battle damage assessment, interview witnesses or properly identify bodies.

Civilians may also get caught up in so-called "signature strikes" in which operators target individuals based on behavior, not on known identity. This is legally questionable but also has real ramifications for civilians living under drones.

If a civilian in Pakistan doesn't know what behavior makes him a target for U.S. drones, he cannot fully protect himself and his family. If a drone harms his family, even mistakenly, our research shows they won't receive an apology, explanation or any help from the United States. Certainly there will be no love lost for America.

Any deaths and injuries are compounded by psychological trauma, displacement and fear and suspicion among neighbors. One Pakistani told us, "We fear that the drones will strike us again. ... My aged parents are often in a state of fear. We are depressed, anxious and constantly remembering our deceased family members."

Gen. Stanley McChrystal, the former commander of international forces in Afghanistan, recently noted, "What scares me about drone strikes is how they are perceived around the world. ... (T)he resentment created by American use of unmanned strikes ... is much greater than the average American appreciates. They are hated on a visceral level, even by people who've never seen one or seen the effects of one."

The drone program needs to come out of the shadows, with explanations about who is a civilian, who is a target, and how drone operators distinguish between the two.

The CIA should get out of the drone operation business, handing it over to the Defense Department, which has a culture of learning lessons, accountability to Congress and a new openness about civilian protection after 10 years of war in Afghanistan and Iraq.

Drone operators should be trained in civilian protection best practices, and any civilian harmed should receive recognition and help for their losses, in accordance with the values American policymakers have espoused about humanity even during times of war.

The Senate may confirm Brennan as head of the CIA. It should also confirm where he stands on government accountability for lethal force and the CIA's role in the remote drone program.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Sarah Holewinski.

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Snow to hit evening commute

A freezing rain advisory had barely expired when the National Weather issued a winter storm advisory with up to 4 inches of snow expected to fall this afternoon and tonight.

Rain is expected to change over to snow by the middle of the afternoon "in time for the evening rush," the weather service said in the advisory.

"The threat for a period of heavy snow could result in reduced visibilities under a mile at times and rapid accumulation on area roads during the evening commute," the weather service warned. The most snow is expected to fall north of I-88 and the North Side of Chicago, it said.

The morning commute was slickened by sleet and freezing rain across northeast Illinois, mainly along I-88 and north of the expressway, according to the weather service.

Photos: Chicago winter 2012-13

Meanwhile, New England braced for a possibly record-setting winter storm, with forecasts of up to two feet of snow prompting local officials to urge residents to prepare.

Forecasters warned the snow would begin lightly on Friday morning but ramp up to blizzard conditions by afternoon, leading Boston Mayor Thomas Menino to order the city's schools closed Friday. He asked businesses to consider allowing staff to stay home.

"We are hardy New Englanders, let me tell you, and used to these types of storms. But I also want to remind everyone to use common sense and stay off the streets of our city. Basically, stay home," Menino told reporters. "Stay put after noontime tomorrow."

The National Weather Service said Boston could get one to two feet of snow on Friday and Saturday, which would be its first major snow fall in about two years. Light snow is expected to begin falling around 7 a.m. EST on Friday, with heavier snow and winds gusting as high as 60 to 75 miles per hour as the day progresses.

"It's the afternoon rush-hour time frame into the evening and overnight when the height of the storm will be," said Kim Buttrick, a meteorologist at the National Weather Service in Taunton, Massachusetts. "That's when we expect the storm to begin in earnest."

The heaviest snow was expected around Boston, the region's most populous city, with cities from Hartford, Connecticut to Portland, Maine, expected to see at least a foot.

If more than 18.2 inches of snow fall in Boston, the storm will rank among the 10 biggest snowfalls on record in the city. The heaviest snowfall ever recorded in Boston was a 27.6 inch dump that accompanied the blizzard of February 17-18, 2003.

The storm's timing brought back memories of the blizzard of 1978, Boston's second-heaviest recorded snow fall, which roared in on an afternoon, dropping 27.1 inches of snow, trapping commuters on roadways and leaving dozens dead across the region, largely as a result of downed electrical lines.

Peter Judge, a spokesman for the Massachusetts Emergency Management Agency, said one of the state's biggest worry is power outages.

"It being winter, folks losing their power means they're also losing their heat, and if you lose heat during the middle of the storm, you're not going to be able to go out to get to a shelter," he said, adding that the agency would begin 24-hour operations at its emergency compound at noon (1700 GMT) on Friday and would be in close contact with local utilities.

Unlike the 1978 blizzard, which had been forecast to drop far less snow than it actually did, he said he hoped several days of news coverage about this storm would prompt people to stay off the roads.

"People have been warned, they have been told what the issues are," Judge said. "We don't expect people to be surprised."

Reuters contributed to this report.

chicagobreaking@tribune.com

Twitter: @chicagobreaking

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Iran's Khamenei rebuffs U.S. offer of direct talks

DUBAI (Reuters) - Iran's highest authority, Ayatollah Ali Khamenei, on Thursday slapped down an offer of direct talks made by U.S. Vice President Joe Biden last week, saying they would not solve the problem between them.

"Some naive people like the idea of negotiating with America, however, negotiations will not solve the problem," Khamenei said in a speech to officials and members of Iran's air force carried on his official website.

"If some people want American rule to be established again in Iran, the nation will rise up to face them," he said.

"American policy in the Middle East has been destroyed and Americans now need to play a new card. That card is dragging Iran into negotiations."

Khamenei made his comments just days after Biden said the United States was prepared to meet bilaterally with the Iranian leadership. "That offer stands but it must be real and tangible," Biden said in Munich on Saturday.

With traditional fiery rhetoric, Khamenei lambasted Biden's offer, saying that since the 1979 revolution the United States had gravely insulted Iran and continued to do so with its threat of military action.

"You take up arms against the nation of Iran and say: 'negotiate or we fire'. But you should know that pressure and negotiations are not compatible and our nation will not be intimidated by these actions," he added.

Relations between Iran and the United States were severed after the overthrow of Iran's pro-Western monarchy in 1979 and diplomatic meetings between officials have since been very rare.

ALL OPTIONS STILL 'ON THE TABLE'

Currently U.S.-Iran contact is limited to talks between Tehran and a so-called P5+1 group of powers on Iran's disputed nuclear program which are to resume on February 26 in Kazakhstan.

In Washington, U.S. State Department spokeswoman Victoria Nuland brushed off Khamenei's remarks and urged Iran to show up in Almaty "prepared to discuss real substance" either in a group setting or in bilateral talks.

"As the Iranians well know, the ball is in the Iranians' own court," she told reporters.

"We've always said that action on the Iranian side would be matched by action on our side, so it's really up to Iran to engage if it wants to see sanctions eased," said Nuland, adding that failure to address the nuclear concerns would bring more pressure on Tehran.

Israel's Deputy Prime Minister Dan Meridor said he was skeptical the negotiations in Almaty could yield a result, telling Israel Radio that the United States needed to demonstrate to Iran that "all options were still on the table".

Israel, widely recognized to be the only nuclear power in the Middle East, has warned it could mount a pre-emptive strike on Iranian atomic sites. Israel says the prospect of a nuclear-armed Iran threatens its existence, given Tehran's refusal to recognize the Jewish state.

"The final option, this is the phrasing we have used, should remain in place and be serious," said Meridor.

"The fact that the Iranians have not yet come down from the path they are on means that talks ... are liable to bring about only a stalling for time," he said.

Iran maintains its nuclear program is entirely peaceful but Western powers are concerned it is intent on developing a weapons program.

Many believe a deal on settling the nuclear issue is impossible without a U.S.-Iranian thaw. But any rapprochement would require direct talks addressing many sources of mutual mistrust that have lingered since Iran's 1979 Islamic Revolution and the subsequent U.S. embassy hostage crisis in Tehran.

Moreover, although his November re-election may give President Barack Obama a freer hand to pursue direct negotiations, analysts say Iran's own presidential election in June may prove an additional obstacle to progress being made.

(Additional reporting by Dan Williams, and Paul Eckert in Washington; Editing by William Maclean, Jon Boyle and Mohammad Zargham)

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Wall Street pulls back after recent gains

NEW YORK (Reuters) - Stocks drifted lower on Wednesday as investors pulled back after the recent push to five-year highs on the S&P 500 and as worries about political problems in Europe weighed on sentiment.

Transportation stocks were among the worst performers, pressured by a 9.7 percent drop in CH Robinson Worldwide to $60.48 after the freight transport company posted a lower-than-expected adjusted quarterly profit.

The benchmark S&P 500 index has advanced 6 percent this year and reached to its highest since December 2007. The Dow industrials <.dji> have risen above 14,000 recently, making it a challenge for investors to push stocks higher in the absence of strong positive catalysts.

"The market is starting to feel a little tired, though we're holding together. I think a lot of people are wondering whether this (up trend) continues," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

Also, investors have been speculating about leadership changes in Spain and Italy, as well as watching for comments from European leaders. European Central Bank policymakers are due to meet Thursday.

The Dow Jones industrial average <.dji> was down 27.37 points, or 0.20 percent, at 13,951.93. The Standard & Poor's 500 Index <.spx> was down 3.66 points, or 0.24 percent, at 1,507.63. The Nasdaq Composite Index <.ixic> was down 12.27 points, or 0.39 percent, at 3,159.31.

Both the S&P 500 and Nasdaq rose more than 1 percent on Tuesday.

The Dow Jones Transportation average <.djt> was down 0.4 percent after hitting another record high on Tuesday. The average is up 10.4 percent for the year so far and has made a series of new highs since mid-January.

Among shares trading higher, Time Warner Inc jumped 4.4 percent to $52.18 after reporting higher fourth-quarter profit that beat Wall Street estimates, as growth in its cable networks offset declines in film, TV entertainment and publishing units.

Walt Disney Co was up 0.7 percent at $54.66, after the company beat estimates for quarterly adjusted earnings and gave an optimistic outlook for the next few quarters.

According to Thomson Reuters data, of 301 companies in the S&P 500 that have reported earnings, 68.1 percent have exceeded analysts' expectations, above a 62 percent average since 1994 and 65 percent over the past four quarters. In terms of revenue, 65.8 percent of companies have topped forecasts.

Fourth-quarter earnings for S&P 500 companies are estimated to have risen 4.7 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

(Editing by Bernadette Baum, Kenneth Barry and Nick Zieminski)

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