The bellwether 10-year Treasury firmed by four basis points to 3.61% on Monday. Overnight saw a reversal back to 3.65%. Other maturities are also weaker with the 2-year yield up 3 basis points to 0.87%.

In Europe, GDP results were weaker than anticipated as EuroZone real GDP inched forward by 0.3% in Q4. Germany posted a 0.4% advance, France was up 0.3%, and Italy eked out a 0.1% gain. In Asia, the Bank of Japan upgraded the economic outlook and China's inflation rate rose from 4.6% to 4.9%.

The 10 year Treasury note is currently -10/32 at 99-24 yielding 3.657%. The FNCL 4.5 is -3/32 at 100-21.

Equity futures are directionless as investors await key retail sales and housing construction data, plus a regional manufacturing report from New York and another view from a Federal Reserve official.

S&P 500 futures are down 0.75 points to 1,327.00, while Dow futures are trading 6 points higher at 12,218. So far this year the benchmark S&P has gained 5.94%

Light crude oil is 0.98% up at $85.64 per barrel, gold prices are 1.01% higher at $1,375.44 per ounce.


Key Events Today:

8:30 ― Retail Sales are anticipated to kick off 2011 with a 0.5% increase, following a 0.6% gain in December and 0.8% uptick in November. The survey has been showing sales growth for the last six months, including the best holiday shopping period in years.  Economists are anticipating the growth to be broad: excluding autos, retail sales should rise 0.5% for the second straight month.

“Consumers have been spending more due to relatively good news on the employment front, pent-up demand, low prices, and a significant decline in the non-mortgage debt to disposable income ratio,” said economists at IHS Global Insight. “However, consumers are not throwing caution to the wind because of gasoline and food prices, a high and persistent unemployment rate, and an extremely depressed housing market.”

Economists at BTMU pointed out that fourth-quarter retail sales advanced 4.4%, the fastest pace since early 2006, and that January should confirm the momentum continues into 2011.

“In general, the retail sector continues to battle a high unemployment rate, but consumer confidence is improving and recent government stimulus should help boost spending in 2011,” they wrote. 

8:30 ― The Empire Fed Manufacturing Survey, the first regional index to be released for the sector each month, is forecast at +15 in February, compared to +11.9 in January. The threshold for growth is zero. Predictions range from 11 to 20, indicating stability in the sector after a low +2 reading was seen in November ― called a bizarre aberration by one economist. Forward-looking components in the January index provide some optimism for this month, including a +12.4 score for new orders and +25.4 for shipments

“Momentum in the manufacturing sector looks solid, with all the major survey indexes reporting healthy results in recent months,” said economists at Nomura Global Economics. “We see little reason for this trend to break in February ― and at 11.9, the Empire State index is not particularly elevated compared to its cyclical highs. Watch the ‘prices received’ index in the survey for evidence of pass-through from higher commodity prices onto finished goods.”

10:00 ― Business Inventories are expected to end 2010 with a 0.7% climb, versus a modest 0.2% increase the month before. The November index was inconsistent, with manufacturing inventories advancing 0.8%, wholesale inventories slipping 0.2%, and retail inventories unchanged. Recent expansion in factory orders and wholesale inventories point to more consistency of growth for December.

10:00 ― The Housing Market Index, an index of Homebuilder Sentiment Index compiled by the National Association of Home Builders, continues to stagnate well below the 50 level which indicates general optimism. The January index remained at just 16, failing to live up to modest expectations. Worse, the 'traffic of prospective buyers' component was at 12. Continued cold weather is expected to keep the index low in February, though a consensus forecast was not available at the time of writing.

“The index of homebuilder sentiment remains low, and at some point could rise quickly,” said economists at Nomura Global Economics. “But for the time being we believe the index will remain stuck at low levels. Recent news on home construction, construction employment, home sales have all been quite poor. We therefore see little reason for greater optimism among builders.”

10:00 ― Sandra Pianalto, president of the Cleveland Fed, speaks on regional and national economic conditions to Women's Boards of Summa Health Systme in Akron, Ohio.

10:15 ―  The Fed will buy an estimated $5-7 billion in Treasuries maturing between 2/28/2015 to 8/15/2016