The market is seeing a mild pull back sparked by profit taking on earnings reports from Oracle (ORCL) and FedEx (FDX). The parade of positive economic data continues with the Philly Fed manufacturing index, housing starts, and jobless claims. The U.S. dollar is bouncing from its lows, which is prompting profit taking in commodities and commodity-related stocks.

It was also a quiet news day for foreign markets but Asian stocks were in rally mode. The Japanese NIKKEI gained 1.6%. The Hong Kong Hang Seng rose 1.7%. The Chinese Shanghai surged 2.0%. The rally continued in Europe but gains were more contained. The German DAX and French CAC-40 were both up 0.5%. The English FTSE rose 0.78%.

Here at home the latest housing starts were a sign of improvement. The Commerce Department said August housing starts rose to the best levels in nine months. Officially starts rose 1.5% to an annual pace of 598,000 units. Economists were forecasting a rise to 600,000. Unfortunately the single-family home sector saw starts fall while permits for multi-family apartment buildings rose almost 16%. The homebuilder index (DJUSHB) is down 2.8% on the news.

The Philadelphia Federal Reserve regional manufacturing index soared from a reading of 4.2 in August to 14.1 in September. This is very encouraging and supports a view that the economy should see positive growth this quarter. The Philly manufacturing index's jump pushed it to the highest levels since June 2007.

Weekly jobless claims improved. The Labor Department revised last week's numbers higher to 557,000 but this week's numbers came in at 545,000. Analysts had been forecasting a rise in new jobless claims. Meanwhile the number of unemployed receiving continuing benefits rose to 6.2 million workers.

The U.S. dollar is bouncing from its lows for the year. This put the brakes on the rally in oil. Crude oil had surged over $73 a barrel this morning but is currently trading down around $72.28. Gold futures, which had hit new relative highs near $1,020 an ounce yesterday are down toward $1,013 an ounce. The worst performing sectors today appear to be the homebuilders (-3.0%) and the mining stocks (-2.0%). The best performing sectors are airlines (+1.2%) and the defense sector (+1.1%).

Currently the S&P 500 index is off less than four points at 1,065. The NASDAQ composite is off less than nine points at 2,124. The Dow Industrials are down less than 15 points at 9,777. The small cap Russell 2000 index is down less than four points at 614.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

A quick review of the OptionInvestor.com play list reveals that ACL is showing relative strength with a new high. CF is also showing relative strength with a new high. CMP hit our first target at $59.75. Goldman Sachs (GS) continues to rally and is above round-number resistance at $180. MTD has managed to keep the rally alive and hit our first target to take profits at $93.50. STT hit our first target at $55.00 this morning.