(RTTNews) - Stocks are treading below the unchanged mark in mid-morning trading on Tuesday, as the day's disheartening data on housing starts deflated early optimism. The major averages are all in negative territory, giving back some of yesterday's notable gains.

On the economic front, the Commerce Department reported that housing starts increased modestly in September but still came in well below economist estimates due in part to a downward revision to the previous month's data.

The report showed that housing starts edged up 0.5 percent to an annual rate of 590,000 in September from the revised August estimate of 587,000. Economists had expected starts to rise to 610,000 from the 598,000 originally reported for the previous month.

Additionally, the report showed that building permits, an indicator of future housing demand, fell 1.2 percent to an annual rate of 573,000 in September from the revised August rate of 580,000. The drop in building permits came as a surprise to economists.

The disappointing housing data offset some of the positive sentiment generated by better than expected earnings from companies such as Apple (AAPL) and Caterpillar (CAT), although the positive earnings news has helped to limit the downside for the markets

The major averages have all seen some upside in recent trading but remain in negative territory. The Dow is currently down 30.38 at 10,061.81, the Nasdaq is down 3.97 at 2,172.35 and the S&P 500 is down 3.15 at 1,094.76.

Sector News

Defense stocks are seeing a considerable pullback in mid-morning trading, with the Philadelphia Defense Sector Index posting a loss of 1.8 percent. With the retreat, the index is pulling back off of its best closing level in over a year.

Lockheed Martin (LMT) is helping to lead the sector lower, falling by 5.4 percent. At its lows for the session, the stock was at its worst intraday price in just over six months. The loss comes after the firm issued a disappointing 2010 revenue outlook, although its third quarter earnings beat estimates.

Gold and real estate stocks are also moving lower, with the NYSE Arca Gold Bugs Index and the Morgan Stanley REIT Index both down by 1.8 percent. The gold index is backing further off of this month's fifteen-month closing high, while the REIT index remains stuck in a trading range.

On the upside, healthcare provider, computer hardware and airline stocks are bucking the day's downtrend, with the Morgan Stanley Healthcare Provider Index setting a fresh historic intraday high, while the NYSE Arca Computer Hardware Index is at a nine-year intraday high.

Stocks Driven By Analyst Comments

MetroPCS Communications Inc. (PCS) is moving considerably lower in mid-morning trading after being downgraded by Goldman Sachs to Neutral from Buy, with a target price of $7. The broker cited the firm's pullback in market share as a reason for the downgrade, being bested by Boost Mobile. The stock is currently down by 5.9 percent, setting an historic intraday low.

Pactiv Corp. (PTV) is also retreating following a downgrade by Barclays, which lowered its rating on the stock to Equal Weight from Overweight. Barclays said higher costs in the second half of the year are likely to weigh on results. Shares of the packaging products maker are sliding by 1.3 percent, falling further away from a recent one-year closing high.

On the other hand, shares of Family Dollar Stores (FDO) are moving higher after being upgraded by Credit Suisse, which raised its rating to Outperform from Neutral, citing growth potential. The stock is currently up by 2.3 percent, setting a seven-week intraday high.

Other Markets

In overseas trading, the major Asian markets ended Tuesday's session mostly higher, with Japan's benchmark Nikkei 225 Index climbing by 1 percent while Hong Kong's Hang Seng Index rose 0.8 percent.

Meanwhile, the major European markets are all moving moderately lower, with the U.K.'s FTSE 100, the German DAX Index and the French CAC 40 Index all down by 0.5 percent.

In the bond markets, treasuries are seeing notable strength following the release of the disappointing housing data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.320 percent, posting a loss of 7.5 basis points.