U.S. stocks set for modest gains

NEW YORK (CNNMoney.com) -- U.S. stocks headed for a higher open Wednesday, as investors were heartened by a report showing inflation is remaining low.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were modestly higher ahead of the opening bell. Futures measure current index values against perceived future performance.

"The inflation data means that interest rates are going to stay low for a long time," said Peter Cardillo, chief market economist for Avalon Partners. "The Fed is going to continue to pump money into the economy, at least into the immediate futures, and that is positive for equities."

Stocks fell sharply Tuesday on concerns about economic developments in Europe and China. All three major gauges fell nearly 2%, and the day's losses put stocks on track to post its first down month since August.

Investors have been increasingly concerned about Ireland, where fears of a debt crisis have been brewing this week. The worry is that Ireland's fiscal problems could be a sign of a wider debt contagion in Europe.

But Robert Brusca, chief economist at Fact and Opinion Economics, says there is little the U.S. can do to improve the situation.

"Europe is unsettling and nothing on our side is going to fix that," he said.

Economy: The U.S. Consumer Price Index edged up 0.2% in October, year over year. That was less than the 0.3% increase economists had expected.

Excluding volatile food and energy prices, the so-called core CPI rose 0.6% in October, compared to the same period in 2009. That was much stronger than than the 0.1% that economists expected but it is still considered quite low.

Another government report showed that housing starts fell to an annual rate of 519,000 units in October. That was lower than expected. Housing starts were forecast to fall to an annual rate of 600,000 in October, after an annual rate of 588,000 new single family homes broke ground in September.

Building permits, considered a leading indicator of construction activity, reached an annual rate of 550,000 units in October. This was less than the projected rate of 570,000, but more than September's annual rate of 547,000.

Companies: Discount retailer Target (TGT, Fortune 500) reported earnings early Wednesday morning.

In the third-quarter, earnings per share increased 28.5% to 74 cents per share from 58 cents per share in the same period a year ago. Net earnings for the company increased to $535 million for the quarter. Shares of Target were slightly higher in premarket trading.

After the closing bell, Applied Materials (AMAT, Fortune 500) will report third-quarter earnings. Analysts surveyed by Thomson Reuters expect earnings per share of 31 cents.

GM increased the size of its IPO Wednesday morning to 478 million shares of common stock, bringing the total it could raise from its offering to nearly $20 billion.

World markets: European stocks were mixed in morning trading. Britain's FTSE 100 lost 0.1%, the DAX in Germany gained 0.4% and France's CAC 40 ticked up 0.4%.

Asian markets ended the session mixed. The Shanghai Composite lost 1.9% and the Hang Seng in Hong Kong dropped 2.0%, while Japan's Nikkei gained 0.2%.

Currencies and commodities: The dollar slid against the euro and the British pound, but strengthened against the Japanese yen.

Oil for December delivery slipped 36 cents to $81.98 a barrel.

Gold futures for December delivery edged up 60 cents to $1,339.00 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.85%.