U.S. MARKET AVERAGES

U.S. stock averages traded near the unchanged mark with traders awaiting the first flood of fourth-quarter earnings reports to provide further boost to the market's strong 2006 start and hopefully push the Dow through the much anticipated 11,000 mark for the first time since June 2001. The Nasdaq outperformed its peers during the morning session, posting a gain of 0.4%.

Merger-and-acquisition news led the day's headlines, including Boston Scientific Corp.'s renewed bid for rival Guidant Corp. and Duke Energy Corp.'s agreement to sell some of its North American power plants to private investors. Aluminum giant Alcoa was in the spotlight, expected to kick the new earnings season, releasing its fourth-quarter profit report.

Following a steady rise throughout the morning, the housing sector rose 2.5%, moving to its highest level since mid-September with Champion Enterprises (CHB: chart) the biggest gainer in the group, rising by 6.7%. DR Horton ((DHI}) and Toll Brothers (TOL: chart) climbed 6.3% and 4.5%, respectively.

A decline in oil prices led to some profit taking, sending energy stocks lower. The oil service sector was the most notable loser with a decline of 1.8%.

SanDisk (SNDK: chart) extended its 52-week high on positive analyst comments, continuing its mid-December rise. Rambus (RMBS: chart) advanced 15%, reaching a new peak.

Sanderson Farms (SAFM: chart) dropped Monday morning, continuing last week''s weakness and setting a new 52-week low. Spatialight (HDTV: chart) dropped sharply on negative analyst comments, also establishing a fresh low.

In late morning trading, the Dow rose 4.57, or 0.04%. Broader stock indicators were also at their highest levels since May 2001. The Standard & Poor''s 500 index was up 0.13, or 0.01%, and the Nasdaq composite index added 4.90, or 0.21%.

Bonds declined, with the yield on the 10-year Treasury note rising to 4.38% from 4.37% Friday.

MOVERS AND SHAKERS

Goldman Sachs upgraded General Motors (GM: chart) to in line from underperform due to valuation, given Analyst Robert Barry's belief that a Chapter 11 bankruptcy filing by the automaker is very unlikely in the near term. Even though the company’s long-term fundamentals are still negative, there are potential catalysts that could improve sentiment and ease bankruptcy fears enough to get the stock to bounce to the mid-$20s during the first half of 2006. The stock rose 5.4%.

Investment Technology Group (ITG: chart) climbed 8.1% after it was upgraded at Sandler O''Neill to buy from hold.

Amazon.com Inc. was also downgraded by J.P. Morgan to underweight from neutral, citing concerns that U.S. growth will continue to be below that of the broader electronic commerce market. The stock fell 2.1%.

Prudential Equity Group upgraded Merrill Lynch & Co. to overweight from neutral weight on increased capital markets activity and revenue growth prospects. The stock gained 1.4%.

Abbott Laboratories (ABT: chart) was upgraded to overweight from neutral by J.P. Morgan, on expectations that it Abbott will acquire the vascular and endovascular businesses of Guidant as a result of the Boston Scientific deal. The company’s shares rose 2.1%.

Alkermes Inc. (ALKS: chart) agreed to partner with Eli Lilly on the development and commercialization of inhaled parathyroid hormone for the treatment of osteoporosis. Financial terms weren't disclosed. Alkermes Inc’s shares rose 7.3%.

INTERNATIONAL MARKETS NEWS

Most Asian-Pacific benchmarks reached new highs, boosted by continuing tech rally, climbing commodity prices and expectations of the Chinese Lunar New Year holiday. Hong Kong’s Hang Seng hit a five-year peak of 1.3% to 15,547.43, Taiwan’s Weighted index gained 0.7%, China’s Shanghai Composite rose 0.5%, while Australia’s All Ordinaries reached an all-time high of 0.8% to 4,775.80. Japan was closed for a national holiday.

European stocks closed little changed with averages retreating from multi-year highs on mixed start of U.S. markets. The auto sector provided support. The German DAX 30 gained 0.01% to 5,537, the French CAC 40 added 0.16% to 4,875, and London’s FTSE 100 edged down 0.01% to 5,731. The euro fell 0.75% to $1.2061.

OIL, METALS, CURRENCIES