Street Rallies Ahead Of Fed

Financial stocks helped New York's stock indexes edge higher at the open Tuesday, despite a multibillion-dollar loss from a Wall Street heavyweight. Meanwhile, consumer prices tumbled, according to government data, and new housing construction hit record lows.

All of the morning's news comes as the Federal Reserve wraps up its two-day monetary policy meeting, which is expected to conclude with another cut to benchmark interest rates. The fed funds rate currently stands at 1.0%, but the expected cut to 0.5% would be little more than a formality, since the effective fed funds rate has been trading below that level since mid-October. The central bank's statement will be closely watched for hints toward the Fed's next move, and perhaps a further expansion of its balance sheet through purchases of Treasury bonds or agency debt.

Before the Fed took center stage, Goldman Sachs (nyse: GS - news - people ) made the morning's biggest headlines, recording the first red ink in its 10-year history as a publicly traded company. The firm booked a loss of $4.97 a share, or $2.1 billion, as revenues tumbled across most of its businesses. The news did little to shake investors' faith though, as Goldman shares started the day up $3.00, or 4.5%, to $69.46. Rival Morgan Stanley (nyse: MS - news - people ), which reports fourth-quarter results Wednesday, tacked on 47 cents, or 3.5%, to $14.11.

Shortly after the open, the Dow Jones industrial average gained 55 points, or 0.6%, to 8,619. The Standard & Poor's 500 added 9 points, or 1.1%, to 878, and the Nasdaq was up 21 points, or 1.4%, to 1,529. Volumes were light as investors treaded water before the Fed's statement.

The Labor Department said its Consumer Price Index came in at -1.7% for November, thanks in large part to cheaper oil prices. Excluding fuel and energy costs, the index was unchanged from the month before. The inflation gauge has cooled considerably since the summer, when record fuel costs sent the reading on a dizzying rise. (See "Consumer Prices Take A Dive.")

Crude oil was up 33 cents Tuesday, but still trading at just $44.84 a barrel. United States Oil Fund (nyse: USO - news - people ), an exchange-traded vehicle that tracks crude and other products, gained 84 cents, or 2.3%, to $37.68 early in the session. (See "OPEC: All Eyes On Russia.")

On the housing front, the Commerce Department recorded 625,000 housing starts in November, down 18.9% from the October estimate, and off 47.0% from November 2007. New building permits were at 616,000, down 48.1% from the year before, while housing completions were just below 1.1 million, 22.8% below the year-prior figure. But the drop in starts can be taken as a blessing in disguise, since the glut of inventory that home builders face will be helped by fewer new homes on the market.