Stocks see early gains

NEW YORK (CNNMoney.com) -- Stocks rose Wednesday morning, extending the previous session's advance, as investors mulled Morgan Stanley's earnings and the results of the Fed's Monday's auction.

The Dow Jones (INDU) industrial average added 0.4 percent in the early going. The broader S&P 500 (INX) index gained 0.5 percent. The tech-fueled Nasdaq (INX) composite rose 0.4 percent.

Stocks managed gains Tuesday after a tough session in which strong earnings from Goldman Sachs were countered by ongoing worries about the credit market crisis. After a shaky start Wednesday, investors looked to continue that modest advance, despite some negative corporate news.

In the latest woes for the banking sector, Morgan Stanley (MS, Fortune 500) posted a bigger-than-expected quarterly loss Wednesday morning and said it would take an additional $5.7 billion in writedowns on top of the $3.7 billion it had already announced, due to the subprime mortgage mess.

However, investors sent Morgan shares higher, along with other major banks including Lehman Brothers (LEH, Fortune 500), Merrill Lynch (MER, Fortune 500) and JP Morgan (JPM, Fortune 500).

Among other movers, homebuilder Hovnanian (HOV, Fortune 500) plunged 7 percent after reporting a quarterly loss late Tuesday that more than quadrupled from a year ago.

And in the latest bad news for the housing sector, the level of foreclosures was up 68 percent in November from a year ago, according to tracking service RealtyTrac. On the upside, foreclosures fell 10 percent from the previous month.

Investors also digested the results of the Fed's $20 billion auction launched on Monday. The first of four auctions showed strong demand, as the central bank loaned $20 billion at 4.65 percent. That was slightly below the discount rate of 4.75 percent.

Treasury prices rallied, lowering the yield on the 10-year note to 4.09 percent from 4.12 percent late Tuesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar slipped versus the euro and the yen.

COMEX gold for February delivery fell $2.20 to $805.20 an ounce.