Stocks higher; Freddie sinks

NEW YORK (CNNMoney.com) -- Stocks were mostly higher at the start of trading Tuesday, but Freddie Mac's bigger-than-expected loss and huge writedown sent its shares down by one-third.

The Dow Jones industrial average gained 0.2 percent. The Nasdaq composite index was up 0.4 percent. The Standard & Poor's 500 index added 0.2 percent.

Freddie Mac (Charts, Fortune 500), which generally only purchases securities backed by the safest types of mortgages, was hurt by the rising delinquencies and defaults that has hit the subprime sector and other more exotic home loans. The mortgage financing firm reported a large loss along with an $8.1 billion drop in the value of its assets, as it set aside $1.2 billion to cover credit losses.

Shares of the other government-sponsored mortgage finance firm Fannie Mae (Charts) have fallen nearly 25 percent since it reported lower earnings on Nov. 9 that raised questions about its accounting. Shares of Freddie Mac have fallen nearly 15 percent during the same period.

Housing permits fell to a 14-year low in October although housing starts edged up slightly, according to the Commerce Department's latest reading on state of the batter home building market released.

The report comes a day after a survey showed home builders' confidence remained at a record low level, as a slight pick-up in customer traffic was offset by a more pessimistic view of a chance of a recovery in housing during the next six months.

Another look at the housing market came after DR Horton (Charts, Fortune 500), one of the nation's largest home builders, reported a much smaller-than-expected loss in its fiscal fourth quarter. It did, however, say that the difficult housing-market continues.

Another record low for the dollar against the euro could also weigh on stocks in the early going. The weaker dollar also continues to put upward pressure on oil prices, which gained 94 cents to $95.58 in early trading.

At 2 p.m. ET the Federal Reserve is set to release minutes from its meeting last month, which investors will read carefully for clues as to whether the central bank will continue to cut interest rates or leave them unchanged at its final meeting of the year Dec. 11.

Among stocks to watch, HP (Charts, Fortune 500) reported a surge in quarterly profit that topped estimates after the close Monday. The company also offered earnings and sales guidance for the new fiscal year that also topped forecasts. Shares of the Dow component gained 1.7 percent in after-hours trading on the report.

Target (Charts, Fortune 500), the nation's No. 2 discount retailer, said that third-quarter earnings fell 4 percent, below forecasts, on weak sales despite overall revenue growth. Late Monday, Target reaffirmed its November sales outlook as it looks for sales to be up 2 to 4 percent at stores open at least a year.

Medical device maker Medtronic (Charts, Fortune 500) reported slightly lower earnings in the most recent period, but it still beat forecasts. That helped lift its shares 2.7 percent in after-hours trading.

Tyson (Charts, Fortune 500) announced it would revise labels that say its fresh chicken is "raised without antibiotics" after federal regulators said they made a mistake in approving labels that use that term.

In global trade, stocks in Asia mounted a sharp turnaround to finish the session higher. The rally helped lift European markets in the early going.