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. Traders hoped the inflation data and strong quarterly results from Morgan Stanley would encourage more buying but the early trading followed what''s become a daily pattern on Wall Street, with large-caps leading, tech stocks falling and investors consolidating gains before year''s end.

U.S. stocks turned mixed as General Motors shares dropped, crude oil prices edged up, and investors sold off pharmaceutical issues, following strong gains in the sector on Monday. But financial stocks were strong, helped by a good earnings report 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.

The technology sector was the most notable decliner in morning trading but the semiconductor sector rebounded from early declines to drive 1.2% into positive territory. The airline sector which came off a multi-month high on Monday, continued to fall during Tuesday''s trading to post a decline of 1.6%, paced by a 3.2% decline in Continental (CAL: chart) and a 2.8% drop in AMR (AMR: chart).

The HMO sector climbed 1.4%, reversing most of Monday's decline. While much of technology remains in negative territory, the semiconductor sector has overcome early trepidation to drive 1.2% into positive territory.

AMD (AMD: chart) climbed steadily, pushing above a 3-week trading range to set a new 52-week high. Capital One Financial (COF: chart) reached a new high. NEON Systems (NEON: chart) and Town And Country Trust (TCT: chart) set fresh peaks on their respective deals to be acquired.

GM (GM: chart) was the most notable decliner, reaching a new 52-week low. SeraCare (SRLS: chart) broke to a fresh low after it announced the start of an internal review of its finances. RadioShack (RSH: chart) extended losses, setting a new low.

In earnings news, Morgan Stanley rose 2% 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 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, The Wall Street Journal reported.

In late morning trading, the Dow Jones industrial average rose 9.12, or 0.08%.The Standard & Poor''s 500 index rose 0.82, or 0.07%, and the Nasdaq composite index fell 1.39, or 0.06%.

Bonds moved lower, with the yield on the 10-year Treasury note rising to 4.46% 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.