Stronger retail sales helped send the market higher this morning but the early strength has faded. It's turning into a quiet session. The major market averages are up but they are trading sideways in a narrow range. Several sectors are seeing profit taking. A weaker dollar is fueling another bounce in commodities. Crude oil is up 1% to $78.87 a barrel. Gold futures are up almost $4 to $1,108 an ounce.

Asian markets were mixed. Japan saw gains as investors reacted to better than expected industrial output. November's 2.6% jump in output was the ninth monthly gain in a row. Unfortunately rising inventories and sliding wages could put the economic bounce in jeopardy. The country has been struggling with deflation again and worker's wages fell for the 18th month in a row. The Japanese NIKKEI index gained 1.3%. Further east the Hong Kong Hang Seng index lost 0.17% while the Chinese Shanghai index gained 1.5%. Looking at European markets the trend is still higher. London markets were closed for holiday but the German DAX and French CAC-40 both extended their gains with a 0.7% and 0.88% gains, respectively.

The big story today was MasterCard's SpendingPulse report on retail sales between November 1st through December 24th. This report seeks to track all retail sales payments including cash (although it does not include automobile sales). Last year this report showed a 2.3% decline. This year sales rose 3.6% thanks in part to an extra shopping day between Thanksgiving and Christmas this year. Excluding this extra day retail sales were only up 1%. Wall Street was happy with the headline number (+3.6%), which was impressive given that huge portions of the country were hit hard by snowstorms the week before Christmas.

Online sales were the hot spot this year with a 15.5% jump over last year. Shares of (AMZN) are up 1.5% on the session and trading over $140 again. The question now is how will retailers fare post Christmas? Gift cards are a huge business in January as consumers normally spend more than the gift card they came in to redeem. According to ShopperTrak the week after Christmas was 15% of all holiday sales in 2008. Currently the RLX retail index is up 0.4% and trading near its 2009 highs.

Elsewhere in the market investors were following bonds. The U.S. Treasury auctioned off $44 billion in two-year notes this morning as part of a $118 billion in debt sales this week. The bid-to-cover came in at 2.91, which was seen as somewhat disappointing but it could be due to lack of participants during this holiday week. The Treasury will sell $42 billion in five-year notes on Tuesday and $32 billion in seven-year notes on Wednesday.

Chart of the S&P 500:

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Chart of the Dow Industrials:

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Scanning the play list we see that IBM is breaking out to new highs and has hit our trigger to buy calls at $131.55. NUE appears to be reversing lower after failing near $48.00. AAPL, a strangle play, is hitting new 2009 highs after getting its price target upgraded this morning.