NEW YORK (CNN/Money) - A better than expected retail sales report for January was putting a shine on stocks going into the open Thursday. But with traders focused on U.N. weapons' inspectors report to the Security Council Friday, nobody knew if the gains would last.

"I keep saying it -- sell these rallies," said Putnam Lovell head of equities Jack Baker. "There are too many clouds out there. There's no chance for this market in the near term. It makes no sense to make new commitments."

Still, stock index futures were poised to jump up at the bell. The Commerce Department said retail sales fell 0.9 percent in January after growing 2 percent in December. Excluding auto sales, however, retail sales rose 1.3 percent after rising 0.2 percent in December, and it's that number the market is looking at. Economists, on average, expected retail sales to fall 0.6 percent and non-auto sales to rise 0.5 percent, according to Briefing.com.

In other economic news the government's report on initial unemployment claims edged down to 377,000 in the week ended Feb. 8 from 391,000 the prior week, a number that was lower than expectations.

Investors remain focused on Friday's updated account from U.N. weapons inspectors on what they've found in Iraq, hoping that it will put an end to the bickering in the Security Council. But increasingly, such hopes seem futile, with the U.S. bloc adamant that the time to act is now and the French bloc convinced that inspectors need to be given more time.

Security Council members have already seen a preview of the report, said HSBC currency strategist Marc Chandler, and according to his contacts it offers up no smoking gun. Thursday's revelation that the Iraq has developed a missile that exceeds range limits set by the United Nations helps the U.S. case, however, and it is fueling speculation that the inspectors will conclude Iraq is in "material breach" of U.N. obligations.

For details of Wednesday's decline, click above

Worries over a new terrorist threat to the United States continue to unnerve traders. Military vehicles circled Washington, D.C. and there were fighter aircraft patrols over the capital and New York. Officials raised the national threat level last week due to increased "chatter" intercepted by intelligence agencies.

Meanwhile, North Korea remained a concern after CIA Director George Tenet said the Pyongyang government has the missile capability to strike the U.S. West Coast. The North Koreans have recently restarted their nuclear development.

Stocks have slumped amid the world tension. The major indexes are close to the five-year lows set in October -- the Dow Jones industrial average finished Wednesday at 7,758.17 and the Nasdaq composite closed at 1,278.97.

Shares of McDonald's (MCD: Research, Estimates) lost 1.9 percent in European trading after the fast-food retailer said same-stores sales fell 2.4 percent in January, due to weakness in its European, Asia Pacific and Canadian markets.

After the close, Dell (DELL: Research, Estimates) issues its results for its fiscal fourth quarter. The No. 2 maker of personal computers is expected to post a profit of 23 cents a share, up from 17 cents a year earlier, according to a consensus of analysts surveyed by First Call, and traders have little doubt the company will beat those expectations. But some worry that the company won't give a positive outlook for the beginning of its new fiscal year.

Among U.S. stocks trading in Europe, Dell was down 2 percent.

Asian-Pacific stocks ended lower Thursday on worries over Iraq and, closer to home, North Korea. In Tokyo, export-oriented issues like Sony (SNE: Research, Estimates) helped push Tokyo's Nikkei index down 0.7 percent. Hong Kong's Hang Seng index dipped 1.5 percent.

In Europe stocks pulled out of an early funk and headed higher in anticipation of an up opening in the United States.

Treasury prices edged higher in early trading, sending the 10-year note yield up to 3.90 percent from 3.91 percent late Wednesday. The dollar weakened against the yen and euro.

Brent oil futures gained 48 cents to $32.43 a barrel in London.