North American markets are expected to open little changed Tuesday, as the U.S. Federal Reserve begins a two-day meeting on interest rates.

Fed leaders are expected to push their short-term interest-rate target up another quarter point to 2.5%. Traders will be searching the Fed’s comments tomorrow for signs of whether it still plans to keep future rate increases moderate.

In economic news, the Institute for Supply Management is expected to release its report on U.S. manufacturing activity for January at 10:00 ET. Economists’ forecasts center on a reading of 57.0, a modest decline from the prior month.

The U.S. Commerce Department is due to release its construction report for December, also at 10:00. Economists look for construction spending to have risen by 0.5% in December.

There are no major economic releases from Statistics Canada today.

But on Monday Statistics Canada slashed its numbers for the November trade surplus after a computer error distorted import data, The revised surplus was a modest $5.4 billion, up only slightly from October’s $5.2 billion, and well below the $7.3 billion reported on Jan. 12.

Also yesterday, Statistics Canada reported that gross domestic product grew 0.2% in November after a flat October.

In this morning’s business news, Talisman Energy is boosting its North Sea holdings by paying $155 million US for Petra AS, a subsidiary of Petroleum Geo-Services ASA of Norway.
      
Meanwhile, EnCana is revising its oilsands bitumen reserves estimates to meet U.S. reporting standards. The company said Tuesday it plans to remove its Foster Creek bitumen reserves from the “proved” category. The move affects an estimated 363 million barrels of bitumen, including 2004 reserve additions of 76 million barrels.

Toronto stocks got a lift Monday from Eastman Kodak’s US$980 million takeover offer for printing technology firm Creo. The S&P/TSX composite index gained 62.27 points, or 0.68%, to finish the day at 9,204.05.

Toronto’s benchmark ndex finished the month 0.45% lower.

The junior S&P/TSX Venture composite index slipped 13.70 points, or 0.76%, to end at 1,795.79.

In New York, merger activity fueled stock gains. Citigroup shares rose 1.4% after the bank said it plans to sell the unit to life insurer MetLife for US$11.5 billion.

The Dow Jones industrial average was up 62.74 points, or 0.60%, to close at 10,489.94. The S&P 500 Index was up 9.91 points, or 0.85%, to end at 1,181.27. The tech-heavy Nasdaq composite index was up 26.58 points, or 1.31%, to finish at 2,062.41.

For the month, the Dow ended down 2.7%, the Nasdaq declined 5.2% and the S&P 500 slipped 2.5%.