There isn't a lot to say about yesterday's "action," other than to say the market held its ground in front of today's debt auctions in Spain and Italy, interest rate decisions from the ECB and Bank of England, China's CPI report, and key economic data in the U.S.

With that in mind, there is a lot to cover today and we will try to do so in a manner that puts the brief in Briefing.com.

The S&P futures indication is generally a good place to start since it provides a quick reference to the market's early mindset.  So far, so OK there.  The S&P futures are up three points and are trading 0.3% above fair value.

Debt auctions in Spain and Italy went better than expected, providing the early directional cue for most traders. 

Both countries sold debt at average yields notably below prior auctions on decent demand.  Spain actually sold close to EUR 10 bln in 3-year and 4-year notes, which was substantially higher than the indicated range of EUR 4-5 bln.  Italy for its part sold EUR 12 bln in 5- and 12-month bills.

With that pressure valve loosened, European equity markets moved higher while yields in the secondary market moved lower in reassuring fashion.  The Italian 10-year is at 6.59% today and Spain's 10-year is at 5.09%, down 29 and 23 basis points respectively.

On a related note, both the ECB and Bank of England left their benchmark lending rates unchanged at 1.00% and 0.50%.  That was the expected outcome.

Elsewhere, China reported its CPI increased 4.1% year-over-year in December.  That is back close to the government's target and continues an improving trend in China's CPI data.  This news failed to push Asian markets higher, which seemed to be lying in wait for the aforementioned auction results.

Turning back to the U.S., the December Retail Sales report and the latest initial claims data failed to push the futures market higher.  In fact, the futures market backed up following disappointing headline data, losing most of a 7-point gain before regaining some ground.

Retail sales increased 0.1% in December, according to the Department of Commerce, on top of an upwardly revised 0.4% increase (from +0.2%) in November.  The Briefing.com consensus expected December retail sales to be up 0.4%.

Excluding autos, retail sales declined 0.2% (Briefing.com consensus +0.3%), weighed down primarily by declines in the electronics and appliance (-3.9%), gasoline station (-1.6%), and general merchandise (-0.8%) sales categories. 

Increases in furniture and home furnishings (+1.0%), building material and supply dealers (+1.6%), clothing and clothing accessories (+0.7%), and food services and drinking places (+0.7%) acted as offsets, yet weren't enough to keep ex-auto sales on the positive side of things.

Core retail sales, which exclude autos, gasoline stations, and building material and supply dealers, fell 0.2%.  That was the first drop in this series since July 2010 and will be a negative consideration for many economists as it relates to their forecast for the PCE component of GDP.

The December report certainly produced some headline disappointment, yet it is premature to consider it the early sign of a prolonged downturn in consumption, especially with the December employment report showing an increase in aggregate earnings, consumer confidence readings picking up, and the improvement in initial claims.

Yes, initial claims are improving, even though the latest report defies that statement.

Claims for the week ending January 7 jumped by 24,000 to 399,000 (Briefing.com consensus 375,000).  That led to a 7,750 increase in the 4-week moving average to 381,750, which is still much improved from where it was a year ago.

Continuing claims increased by 19,000 to 3.628 mln (Briefing.com consensus 3.600 mln).  The 4-week moving average for continuing claims was unchanged at 3.605 mln.

So, there you have it.  Around the world in less than 700 words.  Phileas Fogg would be proud.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.