SHATHA al-Musawi, a Shi’ite member of parliament, first encountered the Sunni-Shi’ite divide on the day the Americans captured Saddam Hussein. Hearing the news with a close Sunni friend named Sahira, al-Musawi erupted like a child.

“I jumped, I shouted, I came directly to Sahira and I hugged her,” al-Musawi said. “I was crying, and I said, ‘Sahira, this is the moment we waited for.’”

At least it should have been: Saddam’s henchmen killed al-Musawi’s father when she was only 13; Sahira, too, was a victim, losing her closest uncle to the Saddam government.

But instead of celebrating, Sahira stood stiffly. A day later, al-Musawi said, Sahira’s eyes were red from crying. And before long, like so many Sunnis and Shi’ites in Iraq, the two stopped talking.

Sectarianism has come to haunt her. She entered politics four years ago, flush with idealism, working closely with Sunnis on Iraq’s Constitution and a draft law that would compensate victims of Saddam.

Now, even for her, one of parliament’s most independent figures, the urge to reconcile is being blacked out by distrust and visceral anger.

Her disillusionment goes some way to explain why the Iraqi government has missed most of the political benchmarks laid down by Congress, as the Government Accountability Office concluded in a report due to be released this week.

The GAO stated that at least 13 of the 18 political and security goals for the Iraqi government have not been met.

Al-Musawi’s explanation for the quagmire are personal. After seeing Sunni neighbours kill Shi’ite friends, and after being pushed out of her own home by violence, she has struggled to move beyond the pain and anger. And at the simple apartment in the Green Zone that she shares with her second husband (a Sunni Kurd), al-Musawi, 40, described a score of abuses.

She grew up in a middle-class Baghdad neighbourhood, sharing a large comfortable house with six siblings, uncles, aunts and a brood of cousins.

Then one day in 1980 her father went to work and never came home. She later discovered he had been hit by a car belonging to a government official he had argued with.

On August 15, 1982, the police arrested her relatives and threw them in prison because their names appeared on a list of “undesirables”.

Al-Musawi said she ended up in a dirty cell with her relatives and other women and children. Over the next 38 days, she saw a woman give birth beside her, and heard children promising to kill Saddam. At one point, the police took al-Musawi’s mother away and threw ripped pieces of her son’s shirt on the floor to suggest (falsely) that he had been killed.

Eventually, she said, she got over her ordeal in captivity through her faith and a college degree obtained after marriage, divorce and bearing three daughters. When she and Sahira found out about Saddam’s capture, they were waiting for class at Baghdad University.

“Mr Bush promised Iraq would be a democratic and free country,” she said. “And we believed that.” Then she laughed. It did not take long, she said, before Iraq started to fracture.

In al-Musawi’s mixed neighbourhood of Adel, Shi’ite mosques and religious schools closed by the Sunni-dominated government began to reopen after Saddam’s fall.

Some Sunni Arabs, she said, felt threatened. Soon, Sunni customers at the tailor’s shop where she worked stopped visiting.

Violence followed. In late 2003, al-Musawi said, she saw two cars of men abduct an official at a Shi’ite mosque, tie him to a car and drag him through the streets. Some of the attackers were young men she had known as boys.

“Are you crazy?” she shouted. “Have you lost your minds?”

She began looking to politics “as a way to restore some sanity”, she said. After starting a popular women’s group, she became one of only two women elected to her neighbourhood’s district council.

In 2004 and 2005, five Shi’ite council members were killed, most of them assassinated.

Around the same time, gunmen killed the Shi’ite mayor of Baghdad, Haider Ali, who lived two houses away from her. She said another neighbour, a Sunni and one of Ali’s guards, was probably responsible.

“We were shocked, really,” she said. “We used to have friends, neighbours. In every moment, when you met a person, you didn’t think: Is he Shia or Sunni?”

Then at some point, she said, it switched; sect became the defining characteristic for Iraqis.

Al-Musawi said she left Adel secretly in 2005, when she joined the National Assembly, the precursor to the parliament. One of her daughters was still in high school, and she feared an attack.

Turning down invitations from other Shi’ite parties, she joined a group of moderates in the Solidarity bloc and was elected to parliament in 2005.

Al-Musawi says she shares the Sunnis’ opposition to splitting the country into autonomous sectarian regions, and understands elements of the Sunni position. But her own positions and comments now have a sectarian edge.

In parliament three months ago, she shouted down her colleagues for standing by as Sunni extremists in Diyala Province killed hundreds of Shi’ites. When the speaker, a Sunni, smirked, she screamed: “Why are you laughing, Mr Speaker? I want to know why you’re laughing.” (He waved her away: “Leave it to the women,” he said.)

Al-Musawi also now defends some actions of the Mahdi Army, the militia loyal to Muqtada al-Sadr, the anti-American cleric, saying that it has filled a necessary void.

“The government couldn’t protect the people,” she said. “They couldn’t save them. The Sadrists did that.”

When asked about accusations that the Mahdi Army forced innocent Sunnis out of the Hurriya neighbourhood, which borders Adel, she said Shi’ites had no time to sift the innocent from the guilty because Sunnis were killing Shi’ites.

She says too many Sunnis will never accept Shi’ite rule. They even refuse to accept responsibility for the sins of Saddam or today’s extremists.

“The Sunnis never felt how much we suffered,” she said.

Sunnis say they, too, were victims of Saddam’s tyranny and are even now being pummelled by Shi’ite death squads or American soldiers. Asmaa al-Dulaimi, a member of parliament and the daughter of Adnan al-Dulaimi, who leads the main Sunni bloc, said al-Musawi and her Shi’ite colleagues exaggerated their own victimhood for political gain.

“All of these claims are part of the fake oppression they pretend they endured,” she said.

Statements like these leave al-Musawi seething.

“I can’t stand seeing them controlling things again,” she said. “I can’t stand seeing them in power.”

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On Feb. 27, 2007, we were shaken by the first one-day decline of 2% or more in the Standard && Poor’s 500-stock index in nearly four years. The real surprise came from the lack of such a decline for so long a period. Since 1950, we experienced an average of a little more than four per year, indicating that 2% declines occur about 2% of the time. In the past year, however, we suffered through a total of 16 such one-day sell-offs, with 11 in calendar year 2007. Only the years 2002 (with 29 one-day declines of 2% or more), 1987 (20), 2000 (19), 1974 (15), 2001 (13), and 1998 (12) saw more.

Of course, with five sell-offs already this year, we could end up setting a new annual record. If it’s any consolation, however, the subsequent years saw equity prices rise an average 8.9% and post advances four of six times. Further Erosion Likely

The S&P 500’s performance in February was certainly true to the month’s recent reputation as a difficult period for the market, falling 3.5%, the fourth decline in a row and the sixth decline of the last 12 Februaries. Since 1945, the S&P 500’s average price performance and frequency of decline in February is second only to September’s. This year, besides typical seasonality, we can blame the market’s skittishness on eroding earnings-growth prospects, rising inflationary expectations, and the market’s discounting of an even more severe recession than was initially anticipated. Price weakness was not confined to the S&P 500, however. The S&P MidCap 400 slumped 2%, while the S&P SmallCap 600 fell 3.1%.

Globally, the story was the same, as the S&P Global 1200 edged lower by 0.68% during the month, as additional declines in the S&P Euro350 (–1.32%) and S&P/TOPIX 150 (–1.33%) were offset by advances in the S&P Latin America 40 (7.43%) and the S&P BRIC 40 (8.69%).

This March, at least early on, we may experience additional market madness. This week alone we brace ourselves for several important economic reports. In particular, we see 1) the February ISM Manufacturing and Non-Manufacturing reports showing readings below 50 (implying economic contraction), 2) January factory orders emulating last week’s durable goods orders report by reversing the prior month’s advance, and 3) the monthly nonfarm payroll report registering an increase of 60,000 in February and the unemployment rate ticking up to 5% from 4.9%.

Later this month, OPEC will decide on production cuts, while Federal Reserve policymakers will see whether they should lower the Fed funds rate by 50 basis points to 2.5%, as we and the rest of the Fed watchers expect, and issue a statement that offers hope of additional rate cuts as early as April. Analysts will also be gearing up for the first-quarter earnings reporting season and bracing for negative pre-announcements from corporations. S&P equity analysts see operating earnings for the S&P Composite 1500 (consisting of the S&P 500, MidCap 400, and SmallCap 600 indexes) rising only 1.2% this quarter as an expected 12% decline in year-over-year results for the Consumer Discretionary sector and a 28% further erosion in EPS for the Financials group offset double-digit advances projected for 5 of the 10 sectors, led by Telecommunications Services (45%) and Energy (35%).

From a technical perspective, Mark Arbeter, S&P’s Chief Technical Strategist, tell us that last week’s equity market decline sets up the possibility of an additional test of the late January lows. He sees the major trend as still firmly bearish, and believes that another down leg could take place.

S&P’s Investment Policy Committee continues to recommend a cautious and patient stance toward equities and waits for confirming technical evidence that would suggest the worst is over. We believe the market is likely to improve during the second half, and we are maintaining our yearend target of 1560 on the S&P 500, acknowledging the anticipated benefits to the economy and market from an aggressively easing Federal Reserve and short-term boost from the economic stimulus package, a resulting recovery in the U.S. economy, and the expectation of double-digit earnings growth, according to S&P equity analysts.

March 4, 2008 — Cablevision’s plan to buy an estimated 35 percent stake in touring giant AEG Live is hitting a sour note with investors.

Shares in the company sank 4.7 percent yesterday to $25.51 after Pali Capital analyst Richard Greenfield downgraded his rating to “sell” on concerns that the pending deal - part of a bigger proposed alliance that also includes IAC’s Ticketmaster - is the start of Cablevision’s expansion into live entertainment.

“We believe the Dolan family has no interest in selling Cablevision to Time Warner Cable or any other potential buyer and that it is now focused on utilizing its building free cash flow for a series of acquisitions, which we believe will be very poorly received by investors,” Greenfield wrote.

Cablevision purchased New York’s Beacon Theater in 2006 and the Chicago Theatre in Chicago last year to go with Madison Square Garden and Radio City Music Hall. And more could be on the way, Greenfield said.

“If we believed Cablevision’s actions were isolated to the AEG investment or even just one more theater venue, we would have likely maintained our ‘buy’ rating. However, we believe several acquisitions are currently in the works,” he wrote.

Greenfield believes Cablevision executives are viewing the strategy as a vehicle to boost the value of the company’s Fuse music cable channel.

Fuse - an MTV rival with 47 million subscribers - is expected to play a big role in an AEG relationship, sources said.

Cablevision last year moved Fuse under the MSG umbrella from the Rainbow Media unit, which houses many of the cable networks. A re-launch of the channel is set for later this year.

“Given James Dolan’s love of music and the hiring of [MSG Entertainment President] Jay Marciano in 2005, it now feels like Cablevision’s strategic shift has been in the works for years and has come to the forefront now that the financial markets will not enable Charles Dolan to pursue yet another go-private attempt,” Greenfield noted.

Marciano is a former AEG executive.

brian.garrity@nypost.com