USD/JPY remains locked below the pivotal 78.30 level

US Market Update: Dow -22 S&P -5.3 NASDAQ -10

Economic data

- (BR) Brazil Dec Retail Sales M/M: 0.3% v 0.1%e; Y/Y: 6.7% v 6.0%e; Broad Retail Sales Y/Y: 7.2% v 3.2% prior

- (IC) Iceland Jan Unemployment Rate: 7.2% v 7.3% prior

- (US) Jan NFIB Small Business Optimism: 93.9 95.0e

- (US) ICSC/GS weekly chain store sales w/e Feb 11th: -2.0% w/w; +2.8% y/y

- (PL) Poland Jan M3 Money Supply: -0.8% v -1.4%e

- (US) Jan Import Price Index M/M: 0.3% v 0.3%e; Y/Y: 7.1% v 7.2%e

- (US) Jan Advance Retail Sales: 0.4% v 0.8%e; Retail Sales Less Autos: 0.7% v 0.5%e; Retail Sales Ex Auto & Gas: 0.6% v 0.5%e

- (US) Redbook Retail Sales w/e Feb 11th: +2.7% y/y; Feb MTD: +1.3% v Jan

- (EU) ECB forex reserves w/e Feb 10th: €277.5B v €277.4B prior

- (US) Dec Business Inventories: 0.4% v 0.5%e

- (MX) Mexico Jan Vehicle Production: 202.7K v 211.0Ke; Vehicle Domestic Sales: 75.3K v 115.7K prior; Vehicle Exports: 158.3K v 171.3K prior

- (EU) ECB drains €219.0B vs. €219.0 Target in 7-Day Term Deposits to offset Govt Bond purchases

- Risk is on the back burner this morning and US equity indices are in the red. European stocks had started trading in the red following Moody's big surprise Europe ratings downgrades yesterday evening, however they had risen back into the black heading into the US morning. The headline January advanced retail sales report was weaker than expected, giving traders an excuse to sell risk assets. Back month revisions were negative as well, making for a doubly-negative view of the US consumer. Recall also that on Monday, the S&P 500 rose to near a seven-month high, up more than 25% from a low in early October, putting pressure on key resistance levels.

- In earnings, Avon was in the red ahead of the open, after missing earnings targets and disclosing significant geographical segment sales declines in its Q4 report. The stock shot up to +4% after the open, after executives discussed possible cost-cutting measures on the conference call. Auto parts name BorgWarner met expectations and reiterated its FY12 outlook. BWA is flat on the day. Watson Pharmaceuticals was up as much as 4% thanks to solid increase in the firm's FY12 outlook.

- In FX, EUR/USD moved back toward its lows, dropping below yesterday's post-downgrade lows to around the 1.3136 level. USD/JPY remains locked below the pivotal 78.30 level, which could ignite some upside momentum if breached. Dealers were discussing recent rhetoric regarding more BOJ currency intervention. Many suspect the next move could come if the technical environment became slightly more favorable.

Looking Ahead

- (US) China Vice premier Xi Jinping will visit the White House on Feb 14th

- (IT) Italy PM Monti in Parliament

- (GR) Greece cabinet meeting with possible commentary

- 11:00 (US) Fed to purchase $4.25-5.00B in Notes

- 13:00 (US) Treasury to sell 4-Week Bills

- 16:00 (CL) Chile Central Bank Interest Rate Decision: Expected to cut the Nominal Overnight Rate Target by 13bps to 4.88% (Split unch and cut 25)

- 16:00 (KW) South Korea Jan Export Price Index M/M: No est v 0.3% prior; Y/Y: No est v 2.5% prior

- 16:00 (KW) South Korea Jan Import Price Index M/M: No est v 0.2% prior; Y/Y: No est v 7.1% prior

- 16:30 (US) Weekly API Energy Inventories

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