U.S. MARKET AVERAGES

U.S. stock markets advanced at opening, supported by better-than-expected wholesale inflation data and strong earnings from Morgan Stanley.

The Labor Department reported that November producer prices fell 0.7% on lower energy prices, vs. expectations of a 0.5% drop. PPI rose just 0.1%, better than the 0.2% hike expected on Wall Street. With inflation remaining relatively tame, the Federal Reserve is considered more likely to halt its current regime of rate hikes.

A jump in home construction last month helped ease worries about the cooling housing market. Housing starts rose to an annualized rate of 2.123 million homes in November, up from October's rate of 2.014, according to the Commerce Department.

In earnings news, Morgan Stanley (MWD: chart) rose 2.6% on Q4 earnings which surpassed Wall Street's forecasts by 34 cents per share before a one-time tax benefit. The bank also said it's buying the Goldfish credit card operations from U.K. bank Lloyds TSB for $1.76 billion.

A few merger deals stand out today. Japan's Mori Trust confirmed a report that it''s in talks to sell a central Tokyo property to American International Group Inc (AIG: chart) for more than $3.4 billion.

Also on the mergers-and-acquisitions front Tyco International Ltd is near a deal to sell its plastics unit to private equity group Apollo Advisers for around $1 billion.

Energy stocks recovered some of Monday''s losses as oil prices ticked up. HMO stocks steadied after a sharp decline during the previous session. The gaming and gold sectors posted strength as well.

Technology stocks were the leading decliners Monday and continued to extend their move to the downside, including modest losses in the disk drive, computer hardware and networking spaces.

In the first hour of trading, the Dow Jones industrial average rose 10.72, or 0.1%. The Standard & Poor''s 500 index gained 0.09, or 0.01%, and the Nasdaq composite index added 1.91, or 0.09%.

Bonds moved lower, with the yield on the 10-year Treasury note rising to 4.47% from 4.44% late Monday.



ECONOMIC NEWS

The Department of Commerce released its report on housing starts in the month of November on Tuesday, showing that housing starts rose unexpectedly. The report also showed a notable increase in building permits.

The report said that housing starts rose 5.3 percent to a seasonally adjusted annual rate of 2.123 million units in November from a revised 2.017 million unit rate in October. The increase came as a surprise to economists, who had expected starts to fall to a 2 million unit rate.

The increase in housing starts reflected growth in all regions but the South, with double-digit growth in the Northeast, the Midwest, and the West more than offsetting a 1.3 percent drop in housing starts in the South.

Producer prices fell more than expected in the month of November, according to a report from the Department of Labor, reflecting a significant decrease in energy prices. The report also showed that core prices rose less than expected.

The Labor Dept. said that its producer price index (PPI), a key gauge of wholesale inflation, fell 0.7 percent in November after rising 0.7 percent in October. Economists had been expecting the index to fall by a more modest 0.5 percent.

As mentioned above, the drop by the PPI was largely due to a steep drop in energy prices, which fell 4.0 percent in November after increasing by 4.1 percent in October. The Labor Dept. said that residential natural gas prices led the downturn in energy prices.