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The Goldilocks effect
Futures point higher after latest readings on housing, PPI point to growth that's just right.
December 20, 2005: 9:17 AM EST

NEW YORK (CNNMoney.com) - Stocks looked poised to start higher Tuesday after economic reports pointed to surprising strength in the housing market and little inflationary pressure in the world's largest economy.

S&P and Nasdaq futures rose in early trading, indicating a higher opening for stocks, after reports on housing starts and building permits, as well as the Producer Price Index, the government's key measure of inflation on the wholesale level.

Stocks have fallen for three straight sessions, the market's longest losing streak since October.

The Census Bureau reported that housing starts rose to an annual rate of 2.12 million in November, from a revised 2.02 million in October. It was the third best month on record for housing starts, and followed a sharp drop seen in the October reading.

Meanwhile, producer prices fell a larger-than-expected 0.7 percent last month, the biggest drop in 2-1/2 years, according to the Labor Department. The so-called core PPI, which strips out those volatile costs to provide a better gauge of underlying inflation pressures, edged up just 0.1 percent.

Investors are paying extra attention to inflation readings after the Federal Reserve said last week that future decisions on interest rate hikes would be based on data on prices and economic growth.

It could also be a lighter than normal trading day, which could add to market volatility, due to the first transit strike in 25 years in New York City that could keep some Wall Street traders and investors from getting to work.

But the Securities Industries Association has hired buses to help about 12,000 employees of the city's stock exchanges, brokers and investment banks get to work in lower and midtown Manhattan.

New York Mayor Michael Bloomberg has said the strike, the first since an 11-day work stoppage in 1980, could cost the city some $400 million a day.

Oil prices edged higher. The January light crude futures contract for NYMEX gained 15 cents to $57.51 a barrel in electronic trading, while the February contract for Brent crude added 33 cents to $56.44.

Major markets in Asia closed mostly higher Tuesday with Japan's Nikkei posting a strong gain. Major European markets were slightly lower.

Bond prices edged lower, lifting the yield on the 10-year Treasury to 4.46 percent from 4.43 percent. Bond prices and yields move in opposite directions.

The dollar gained ground against the euro and the yen.

In corporate news, Morgan Stanley said fourth-quarter earnings jumped 49 percent, exceeding expectations, as rising investment banking and trading income and a tax benefit offset credit card losses and expenses from a management shakeup earlier this year. (Full story).

Elsewhere, local Alaska authorities filed a federal antitrust lawsuit late Monday against Exxon Mobil (Research) and BP (Research), charging the two oil giants are restricting the nation's supply of natural gas and keeping prices at record highs.

Officials from the two oil giants have earlier denied such charges, including in testimony before Congress in November.

For a more detailed look at the markets before the open, click here.  Top of page

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