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Today's Market Update with...

Harvey Katz, Value Line's Managing Editor

October 21, 2009 - 8:38 AM ET

The stock market paused yesterday, following a strong rally to start the week, with the Dow Jones Industrial Average easing by 51 points. At its low point yesterday, the Dow was off by almost 100 points. The NASDAQ, meanwhile, shed 13 points.

This latest setback came on some disappointing revenue news from chemicals giant DuPont and a ratings downgrade of aerospace maker Boeing. However, Caterpillar rose smartly on good profit news and, after the close, Yahoo! posted better-than-expected results.

On the downside, the government reported lackluster homebuilding news, as it noted that housing starts edged up less than forecast last month, while building permits fell. Construction activity has stalled the past three months, although starts are still up some 20% from their January levels.

Overall, the economic news has had a somewhat mixed tone to it recently, but earnings results have been almost universally supportive. The only fly in the ointment on the corporate front has been a spotty revenue record among some major industrial companies.

Overall, the stock market still looks healthy and following yesterday's mild setback and an indicated lower opening this morning, the bulls may regroup in the short run and press for further gains. That said, the market is very overbought and likely ripe for some profit taking at some point. In any case, valuations are frothy, suggesting that any negative news could be met harshly.

Factual material is obtained from sources believed to be reliable, but the publisher is not responsible for any errors or omissions, or for the results of actions taken based on information contained herein. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. © 2009 Value Line Publishing, Inc. RIGHTS OF REPRODUCTION AND DISTRIBUTION ARE RESERVED TO THE PUBLISHER. The Publisher does not give investment advice or act as an investment adviser. Value Line, Inc., its subsidiaries, its parent corporation and its subsidiaries, and their officers, directors or employees as well as certain investment companies or investment advisory accounts for which Value Line, Inc. acts as investment advisor, may own stocks that are mentioned on this Value Line Web site.