In a holiday-shortened business week, the U.S. markets are likely to be moved by the continuing unrest in Libya and the Persian Gulf and the continuing political arguments over not just the Federal budget for 2011 and 2012, but budget battles in several states as well. Key economic reports for the week include several measures of consumer sentiment and the second estimate of 2010 Q4 GDP, while earnings are expected from AIG and a host of big retailers, including Wal-Mart, Lowes, Saks, Gap, Kohl’s, Sears, Target and JC Penney.

On Monday, Feb. 21, U.S. markets and most businesses were closed for the Presidents’ Day holiday, though over the weekend the House of Representatives passed a budget bill for fiscal year 2011 that called for more than $60 billion in cuts. Congress is in recess until Feb. 28, giving it little time once it is in session to strike a budget deal before the March 4 deadline and a possible government shutdown. Overseas markets responded negatively to the unrest in Libya, which produces about 2% of the world’s supply of oil, and ratings were cut on Libya and Bahrain’s debt. Prices for Brent crude rose more than 2% Monday in London to a nearly three-year high of $105/barrel.

On Tuesday, Feb. 22, New Jersey Governor Chris Christie, who made a name for himself last year at budget time in his first year in office, and set the tone for similar approaches in states like Wisconsin and Ohio, gives a speech at 2:00 on this year’s state budget. The S&P/Case-Shiller Home Price Index for December is released, as is the Conference Board’s consumer confidence index for February.

Wednesday, Feb. 23, brings a report on existing home sales for January from the National Association of Realtors (though the NAR may have overcounted the number of home sales since 2007, suggesting that the housing recession was even worse than we thought).

Thursday, Feb. 24’s reports include January durable goods orders and new home sales, in addition to the weekly new unemployment insurance claims. AIG is scheduled to report its Q4 and 2010 earnings

On Friday, Feb. 25, the Commerce Dept. provides its second take on GDP in 2010’s Q4. The Reuters/University of Michigan consumer sentiment index is released, while Ireland holds elections for its Dail, or parliament, that many see as a referendum on its bailout. The University of Chicago’s Booth School of Business hosts a forum in New York on U.S. monetary policy; the keynote speaker will be Donald Kohn, the former Fed Vice Chairman who is now with the Brookings Institution.