INSTANT VIEW: Retail sales rise; NY factory activity falls

NEW YORK (Reuters) - Sales at U.S. retailers rose more than expected in October as consumers bought more motor vehicles and other goods, but the previous month's figures were revised sharply downward, a government report showed on Monday.

A barometer of manufacturing in New York State fell in November, suggesting factory activity moderating for the first time in four months, the New York Federal Reserve said in a report on Monday.

KEY POINTS:

RETAIL SALES * In a report that pointed to gradual improvement in spending, the Commerce Department said total retail sales increased 1.4 percent last month, the largest advance since August, after dropping by a revised 2.3 percent in September. * Sales in September were previously reported to have declined by 1.5 percent. Analysts polled by Reuters had forecast headline retail sales rising 1.0 percent last month. Sales in October were boosted by a jump in new vehicle and parts sales, which surged 7.4 percent. * Auto sales had slumped 14.3 percent the previous month following the expiration of the government's popular "cash-for-clunkers" incentive program in August that had buoyed demand for motor vehicles.

EMPIRE * The New York Fed's "Empire State" general business conditions index fell to 23.51 in November from 34.57 in October which was a five-year high. * Economists polled by Reuters had expected a reading of 30.0 in November. * The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

COMMENTS:

GEROGE GONCALVES, HEAD OF FIXED INCOME RATE STRATEGY, CANTOR FITZGERALD, NEW YORK:

"We're stabilizing after initial reaction, but we haven't really lost any major steam from the open, either, so it feels like there's something for everybody and that's making investors of all stripes and colors willing to bid up bonds along with stocks and everything else in between.

"We've seen this before, where we have to divorce ourselves away from the old fundamental reactions.

"It's hard to be short the bond market going into the end of the year. So the tides have turned at least from now until the end of the year where some dry powder is being put to work... If this were a textbook phenomenon we would have seen bonds down, equities up even more. People have to put money to work -- there aren't as many alternative investments available in the fixed income space."

JOSHUA SHAPIRO, CHIEF U.S. ECONOMIST, MFR, INC., NEW YORK:

RETAIL SALES: "Although the "cash for clunkers" program boosted consumer spending in the summer quarter, after that temporary blip (much of which was borrowed from the future anyway) negative fundamentals are likely to persist. Wage and salary income growth has evaporated, credit is very tight, asset values have been decimated, and balance sheets are generally a wreck. Fiscal stimulus will help to blunt this, but is unlikely to turn the tide completely."

N.Y. FED MANUFACTURING SURVEY: "In any event, the combination of aggressive inventory liquidation in recent quarters and stable to moderately higher orders suggests that manufacturing output will be well supported in coming months. A need to replenish automotive inventories will play an important role in this move. From a longer term perspective, once the effect of inventory adjustments wears off from the manufacturing data, it will be up to final demand to carry the baton. On that score, we believe that the recovery process will be subdued and uneven as the household sector continues to struggle with ravaged balance sheets and lingering labor market weakness."

SEAN SIMKO, FIXED-INCOME PORTFOLIO MANAGER, SEI, OAKS, PENNSYLVANIA:

"The retail sales data was definitely positive for October, but the revision for the prior month neutralizes the impact. I think we are moving in the right direction, but it's not a straight line higher.

"The consumer is concerned and cautious about their spending habits. Until we see jobs data come in better than expected the consumer will continue to keep their wallet a little tighter and save, which will be a concern for the holiday season.

"The Empire State manufacturing data came in weaker than expected. It will be volatile; a choppy ride as we recover.

"The Treasury market had seen a bid from early morning and has rallied on this news."

TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:

"Empire was weak across the board when you look at the details but for me, when I'm going to chose one of these two reports to focus on I'm going to focus on retail sales... Leading into the holiday season, that's a great outcome.

"If people are really surprised by (Empire) I'm surprised by that. You had an outsized gain in October... Right after that October number we put out a note saying we expect a pullback.

"Maybe people are thinking, look, manufacturing was supposed to lead us out of this, when you see a pullback in that area, what does that mean for the recovery? But this is a regional indicator. The New York area isn't exactly a hotbed of industrial output."

JOSEPH BATTIPAGLIA, MARKET STRATEGIST, STIFEL NICOLAUS, YARDLEY, PENNSYLVANIA:

"The data is good, and what it demonstrates is that, A, the environment is starting to improve. Softening credit conditions are somewhat is helping the retail sector.

"Also, since analyst expectations have been tight for some time, this is an opportunity for them to open up. Finally, this is consistent with other data points that show the economy is picking up, though we still have a way to go.

"As for the holiday season, it's going to be soft, but it may be better than some people are expecting. That could be a victory there, but no matter what its going to be challenging."

MARKET REACTION: STOCKS: U.S. stock index futures pare gains BONDS: U.S. Treasury debt prices extend gains DOLLAR: U.S. dollar extends losses versus yen