U.S. MARKET AVERAGES

U.S. stocks opened higher for a third day in a row, lifted by merger-and-acquisition news, as well as strong quarterly results from major companies easing investors' concerns about corporate profits and feeding the gains.

Market welcomed news that Walt Disney agreed to acquire animation studio Pixar for $7.4 billion and Guidant accepted Boston Scientific’s higher offer of $27.2 billion, terminating agreement with Johnson & Johnson.

In earnings news, ConocoPhillips reported fourth-quarter profit jump on higher energy prices, followed by another oil producer Amerada Hess, also posting better-than-expected Q4 earnings. Bristol-Myers posted higher Q4 profits, citing a lower tax rate. Colgate-Palmolive reported profit above estimates. Kerr-McGee's Q4 profit jumped on rising energy prices and gains from asset sales. Xerox Corp. reported an 18% jump in Q4 profits on strong sales and cost cutting measures. The company also approved a $500 million stock buyback program

In economic news, the National Association of Realtors said existing home sales dropped 5.7% in December to 6.6 million units. Economists had expected sales to come in at an annualized rate of 6.87 million, down from 6.97 million in November.

In another report, the Department of Energy said that crude oil inventories dropped by 2.3 million barrels in the week ended Jan 20, while gasoline stocks climbed by 3.2 million barrels on higher import. U.S. crude oil imports averaged nearly 9.3 million barrels per day last week and 9.8 million barrels per day over the last four weeks.

The gold sector stood out among the gainers in early going with an advance of about 3%. Drug stocks posted strength, supported by Abbott Labs (ABT: chart) with an earnings-inspired 4% advance. Oil stocks also showed some early strength.

Housing stocks modestly declined in the early going, accelerating their decline to fall 1.8% on worse-than-expected existing home sales data. Ryland (RYL: chart) was the leading loser in the group lower with a decline of more than 5%. Beazer Homes (BZH: chart), DR Horton (DHI: chart) and Toll Brothers (TOL: chart) also posted sharp declines.

The transportation group also moved to the downside, stabilizing after Tuesday''s advance. Defense stocks also traded below the flat line.

The Dow Jones industrial average was up 20.57 points, or 0.19%. The Standard & Poor''s 500 Index was up 2.59 points, or 0.20%. The technology-laced Nasdaq Composite Index was up 5.63 points, or 0.25%.

Bonds fell as stocks climbed, with the yield on the 10-year Treasury note rising to 4.43% from 4.39% late Tuesday.

[MOVERS AND SHAKERS

Netflix (NFLX: chart), online DVD-rental firm, announced Q4 profit six times higher than a year ago on increased subscriber revenue. The company said that it earned $38.1 million, or 57 cents a share, compared with a profit of $5.6 million or 9 cents a share in the year-ago period. On a pro forma basis, Netflix said it earned $41.4 million, or 62 cents a share. Revenue rose 36% to $195 million from $144 million. Subscribers rose 60% from the year-ago period to 4.2 million. The stock jumped 15.3%.

Afilliated Managers Group (AMG: chart) reported Q4 net income rose 67% to $38.8 million, or 90 cents a share from $23.3 million, or 58 cents a share in the year-ago period. Revenue climbed 48% to $272.5 million. Cash earnings were $1.42 a share, up from $1.08 a share. A survey of analysts by Thomson First Call forecast earnings of $1.29 a share and revenue of $256.8 million. The company’s shares rose 6.1%.

CNF (CNF: chart), trucking company, reported Q4 earnings and Q1 outlook fell short of expectations. The company said that it earned $51.2 million, or 92 cents a share, up from $32.2 million, or 58 cents a share a year ago. Excluding discontinued operations, earnings would have been 97 cents a share, missing the average analyst estimate of $1. Revenue rose to $1.09 billion from $967.5 million. For the first quarter, the company expects ongoing earnings of 71 to 77 cents a share, below analyst forecasts of 79 cents. The stock was downgraded to equal weight from overweight. Company’s shares dropped 11.8%.

ECONOMIC NEWS

Crude oil inventories showed a decline in the latest week, according to government statistics released Wednesday. Stocks of gasoline and distillate fuel oil advanced during the period.

The Department of Energy's Energy Information Administration revealed that crude oil inventories dropped by 2.3 million barrels for the week ended January 20, falling to 319.1 million barrels from the prior week's level of 321.4 million barrels. Oil inventories were 11% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week increase of 3.2 million barrels. Gasoline stocks were just 1.6% below their levels of last year. Inventories of distillate fuel oil rose by 1.8 million barrels in the most recent week.

The National Association of Realtors released its report on existing home sales in the month of December on Wednesday, showing a much bigger than expected decrease. NAR noted that existing home sales still hit a new record for the full year.