U.S. MARKET AVERAGES

U.S. stock markets jumped sharply higher after brokerages improved their views of Johnson & Johnson and Google. Traders seemed ready for some bargain hunting at the beginning of the year ahead of the release of Federal Open Market Committee minutes.

Dow component Johnson & Johnson was upgraded to overweight from neutral by J.P. Morgan, with the broker expecting 2006 guidance to be a positive catalyst for the stock.

J.P. Morgan also upgraded Baxter International Inc. to overweight from neutral. Separately, Baxter agreed to license Innovata''s Adept adhesion reduction biomaterial for an undisclosed sum.

Wyeth agreed to develop and market antibody-like drugs from privately-held Trubion Pharmaceuticals in a deal worth up to $800 million. Wyeth, which signed two biotech pacts in December, will pay $40 million upfront with milestones potentially reaching $800 million. Wyeth also agreed to take a stake in Trubion if the company goes public.

Affiliated Computer Services Inc. is reportedly close to selling itself to a consortium of private equity investors for $8 billion in a deal that may close by the end of the week.

The airline sector fell more than 1.1% in the early going on news that Independence Air will cease operations later this week . The retail sector was also weak with traders reacting to Wal-Mart''s (WMT: chart) lackluster December sales results.

The gold sector moved sharply higher in early trading, setting a new high. Energy stocks were also strong, led by the oil service sector, up 2.5%. The computer hardware and drug sectors were other notable gainers in the early going.

The 10-year yield is up 1.8 basis points to 4.413%, moving above its range of the past couple days.

The Dow Jones industrial average rose 3.20 points, or 0.03%. The Standard & Poor's 500 Index was up 1.08 points, or 0.09%. The technology-laced Nasdaq Composite Index gained 11.21 points, or 0.51%.

MOVERS AND SHAKERS

Piper Jaffray lifted its price target on Google (GOOG: chart) to $600 from $445, citing a belief that 2006 will be a 'banner year' for the company. The stock gained 1.3%.

JetBlue (JBLU: chart) was downgraded at Merrill Lynch to neutral from buy. The stock dropped 6.7%.

Digitas (DTAS: chart) agreed to acquire Medical Broadcasting Co., a privately held provider of healthcare interactive marketing services, for $30.4 million in cash and stock with the deal expected to close in the first quarter. The company said the consideration will consist of $22.4 million in cash and $8 million in Digitas common stock. Digitas hopes the acquisition will add to earnings in 2006. The company’s shares declined by 3.3%%.

ECONOMIC NEWS

The Department of Commerce released its report on construction spending in the month of November on Tuesday, showing that spending rose much less than economists had been expecting.

The report showed that construction spending rose 0.2 percent to $1.146 trillion in November from a revised $1.144 trillion in October. While the growth lifted spending to a record high, economists had been expecting an increase of about 0.7 percent.

The Commerce Dept. said that spending on private construction rose 0.2 percent to $892.4 billion in November from a revised $891.0 billion in October. The increase came as non-residential construction spending rose 0.6 percent while residential construction spending was unchanged.

The report also showed that public construction spending rose 0.3 percent to $253.9 billion in November from a revised $253.2 billion in October. Education construction spending rose 1.3 percent while highway construction spending rose 1.6 percent.

Tuesday morning, the Institute for Supply Management released its report on business activity in the manufacturing sector in the month of December, showing that the pace of growth in the sector slowed more than economists had been expecting.

The report showed that the ISM's purchasing managers index fell to 54.2 in December from 58.1 in November. While a reading above 50 indicates growth in the sector, economists had expected a more modest decline to a reading of 57.5.