U.S. Stocks Open Mixed Before Fed Auction Results

NEW YORK (MarketWatch) -- U.S stocks on Wednesday opened mixed in tentative trading, with investors awaiting results from the Federal Reserve's auction and digesting word of more losses from investment bank Morgan Stanley, which also drew a large investment from China.

"Investors overnight became worried once again about investments of risk. Risk of earnings drop, risk of price drop or risk of default, take your pick," said Kevin Giddis, managing director, fixed income, Morgan Keegan & Co. Inc.

The Dow Jones Industrial Average gained 2.5 points to 13,235.

The S&P 500 fell 1.53 points to 1,453.45, while the Nasdaq Composite declined 2.79 points to 2,593.24.

Market participants were also tentative ahead of results from the Federal Reserve's $20 billion auction, due at 10 a.m. Eastern.

Morgan Stanley unveiled a new $5.7 billion write-down on its way to posting a fourth-quarter loss of $3.59 billion, leading CEO John Mack to refuse a bonus. The Wall Street Journal reported that top executives at Bear Stearns will also forgo bonuses this year.

The trend of Asian and Middle Eastern investors taking stakes in Western financials continued, with China Investment Corp. taking a $5 billion Morgan Stanley stake.

Elsewhere, RealtyTrac reported that November foreclosures were up nearly 68% from a year ago, though down 10% from October.

On the interest-rate front, minutes from the last Bank of England meeting revealed the U.K. central bank voted unanimously to cut rates, a surprise for economists, who were expecting a closer decision.

After the close of trading, Nike and Oracle Systems will announce results.

Elsewhere, Palm dropped in pre-open trading after the handset-devices maker forecast current quarter revenue up to 13% below average analyst estimates.

TD Ameritrade lifted its earnings outlook. Rival E-Trade rose in pre-open trading.

The dollar weakened against the yen while it rose vs. the euro. Crude-oil futures rose 20 cents to $90.28 a barrel.

The Nikkei 225 ended 1.2% lower in Tokyo. In London, the FTSE 100 was flat.

U.S. stocks closed a choppy session with gains on Tuesday, with Best Buy and Adobe Systems closing higher after quarterly reports. The Dow industrials rose 65 points, the S&P 500 ended 9 points higher and the Nasdaq Composite tacked on 21 points.

By Kate Gibson