Sample code for making an item point towards the mouse

compass_rotation_compact.as

compass.rotation = Math.atan2(event.stageY - compass.y, event.stageX - compass.x) * (180/Math.PI) + 90;

compass_rotation_expanded.as

//Get the location of the mouse relative to the compass
var dx:Number = event.stageX - compass.x;
var dy:Number = event.stageY - compass.y;

var radianRotation:Number = Math.atan2(dy, dx);
var degreeRotation:Number = radianRotation * (180/Math.PI);

//Offset the rotation by 90 degrees to make it show up properly
compass.rotation = degreeRotation + 90;