Stock index futures are down in early trade after more somber news from the housing front. U.S. housing starts and permits for future construction both dropped to record lows in October, signs the housing downturn may extend into a fourth year. The Commerce Department reported residential construction starts fell 4.5 percent in October, while building permits dropped 12 percent to the lowest level since 1960. Inflation appears to be a non-issue, as a separate government report showed the consumer price index fell 1 percent in October, the biggest drop since 1947.

Despite all the doom and gloom, apparently there are some investors are optimistic about the stock market’s prospects. According to an investor survey conducted by Merrill Lynch, 36 percent of the 180 investors surveyed said they were now “overweight” U.S. equities, the highest since at least 1998 and double that of last month. Thirty percent also said the outlook for earnings in America was “most favorable.” Read the full article as reported on Bloomberg.

Lind Plus Senior Market Strategist Jeff Friedman said Tuesday’s stock market gains were somewhat of a surprise given weak fundamental news, dubbing the rally as a combination of bargain-hunting and short-covering. “Economic news continues to be grim and likely will be for some time. The market is going to have a hard time rallying significantly. We are still in a bear market,” he said. Friedman said a move in December S&P 500 futures above 884 should bring 900 in view, and a move over 905 – 910 will chase away some of the bears. He said support is at 838 today and expects 832 – 825 to hold.