The blue-chip

Dow was hanging on to its early gains, while the

Nasdaq was sinking decisively into the red. After days of wishy-washy trading, it's a new move for the market.

In the middle of a harried fourth-quarter earnings season, a disappointing

speech from

Federal Reserve Chairman

Alan Greenspan this morning is now coming to a close.

The Fed chief's speech did not provide the hoped-for clues to the Fed's plans for interest rate cuts, and investors may have been disappointed. Investors are hoping for another half-point drop in short-term rates when the Fed meets on Jan. 30 and Jan. 31, but they're expecting at least a quarter-point cut.

What Greenspan did say is that he supports reducing the federal debt, is supportive of tax cuts and isn't supportive of increased spending at the federal level -- a mantra that he has sounded time and again before Congressional committees. It is highly unlikely that Greenspan will make any reference to interest rate cuts in the question-and-answer session now under way. In response to questioning, he did say, however, that the economy is "very close to zero growth at this particular moment." He also said, "We know the fourth quarter was a very small positive, but there is an inventory liquidation process going on."

Ahead of the speech, the Dow popped higher on broad strength in many of its components, but it was lately giving up some of those gains. But major firepower was lately concentrated in drug stock

Merck

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and diversified industrial to

United Technologies

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, which were adding 36 points of upside to the index.

Merck was rising with the rest of the drug stocks, which have been under pressure in the past two days despite strong earnings reports. The

American Stocks Exchange Pharmaceutical Index

was lately up 2%.

The Nasdaq slumped early on and stayed there. Some of the most actively traded stocks on the index were optical

JDS Uniphase

(JDSU)

, software company

Oracle

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, networker

Cisco

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, PC maker

Dell

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and drug maker

Immunex

(IMNX)

. JDS was off 8.6%, Oracle was up 0.6%, Cisco was dropping 3.8% and Dell was off 1.4%. Immunex was also trading lower despite reporting fourth-quarter profits up more than 200% to 9 cents a share, beating analyst forecasts by a penny. Immunex was off 6.7%.

Other tech companies were also suffering after reporting disappointing earnings last night. Fiber-optic systems manufacturer

Harmonic

(HLIT) - Get Harmonic Inc. Report

reported a fourth-quarter loss of 30 cents per share, at the low end of its reduced guidance and steeper than analyst forecasts of 26 cents. And Web-hosting firm

Exodus

(EXDS)

posted a narrower-than-expected fourth-quarter loss after the close of trading Wednesday. But

earnings before interest, taxes, depreciation and amortization came in lower than analysts had expected. More importantly, Exodus lowered its guidance for 2001 sales, citing the nagging matter of its small, dot-com customers running out of money. Harmonic was off 17.2% to $9.03 and Exodus was down 9.1% to $25.56.

Andother optical stock,

Corning

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warned about softer demand in the first half of this year.

Corning's warning and separate news that a planned merger between optical favorites JDS Uniphase and

SDL

(SDLI)

had been

delayed again were torpedoing optical stocks today. Corning was falling 13.1%, SDL was off 8.5%, JDS was falling 8.8%,

Ciena

(CIEN) - Get Ciena Corporation Report

was down 7.4% and

PMC Sierra

(PMCS)

was falling 5.8%.

Corning reported fourth-quarter earnings that beat analysts' forecasts but warned that it expects many of its customers in both its optical-fiber and photon-technologies segments to cap demand in the first half of the year. Guess who swung into action?

Merrill Lynch

and

Salomon Smith Barney

both downgraded Corning this morning.

Meanwhile, JDS and SDL said the effective date of their merger was pushed back because of continuing antitrust concerns at the

Justice Department

. The companies say a shareholder vote on the merger has been rescheduled for Feb. 12. The completion of the merger had already been delayed once due to antitrust concerns. The companies initially expected to close the deal by the end of December.

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JDS Uniphase reports earnings today after the closing bell, and stock watchers are going to scrutinize the company's take on the sales climate for the first quarter -- particularly after Corning's cautionary words. They will also be listening for more details on the delay of its SDL acquisition.

Meanwhile, some decent earnings from drug companies this morning was actually lifting the sector today -- drug stocks have limped slowly lower in the past two days despite strong earnings from

Pfizer

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,

Bristol-Myers Squibb

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and Merck.

Drug czar

Eli Lilly

(LLY) - Get Eli Lilly and Company (LLY) Report

reported fourth-quarter earnings of 70 cents per share, in line with analyst estimates but a penny below the year ago quarter. Lilly also matched analyst estimates for sales of its schizophrenia drug Zyprexa and osteoporosis drug Evista. The company projected earnings to fall between $2.75 and $2.85 per share for the full year 2001. Analysts polled by

First Call/Thompson Financial

are forecasting $2.83 per share. Eli Lilly was up 0.6%.

Schering-Plough

(SGP)

reported fourth-quarter earnings Thursday of 39 cents a share, in line with the 24-analyst First Call/Thomson Financial consensus estimate and up from year-ago earnings of 34 cents a share. Schering rose 3.5%.

The drugmaking company said profits rose 13% thanks to strong sales of its allergy drug Claritin and its Rebetron therapy for hepatitis C. It also saw a nice boost in worldwide pharmaceutical sales, especially growth in the three largest therapeutic product categories: allergy/respiratory, anti-infective/anticancer and cardiovascular. Schering-Plough is expected to lose market exclusivity in the U.S. for Claritin this year, but the company is awaiting marketing approval for closely related Desloratadine, which it says is superior to Claritin.

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Sector Watch

It was a defensive day on the stock market today, as investors started taking profits in some of the tech stocks that had ratcheted up recently. That money was flowing into paper, gold, utility, transport and drug stocks.

Merck

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, which fell Wednesday despite strong earnings, was up 3.6% and was providing some kick to the Dow.

Semiconductor stocks, which have been trending higher since hitting lows at the beginning of the year, were falling today. The

Philadelphia Stock Exchange Semiconductor Index

was down 1.8%.

Investors were not shunning cyclical stocks in general, however, indicating that today's downturn is not about lost faith in recovery of the economy. It's simply profit-taking. Cyclicals tend to grow and slow in step with the overall economy, but they haven't been rallying along with tech stocks so far this year. The

Morgan Stanley Cyclical Index

was up 0.7%.

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Bonds/Economy

Treasury prices slid precipitously for a while as

Federal Reserve chairman

Alan Greenspan gave few clues about monetary policy and chose instead to elaborate on the benefits of a possible tax cut. He was addressing the

Senate Budget Committee

this morning and had been expected to hint broadly about the corrective fiscal steps to be taken at the

FOMC meeting next week. The absence of such mention brought about an abrupt reversal in the money market, striking an especially jarring note since employment cost data released earlier had shown inflation to be firmly under control.

Bonds however began to pull back as analysts absorbed the correct context of the speech and kept their optimism alive about looser money supply in the very near future. The mix of distressing economic data released recently has had market watchers hoping for the central bank to swiftly turn the slump around, particularly with the help of interest rate cuts. While Greenspan may have preferred to concentrate on the tax proposal today, he did not rule out another major reduction in lending rates.

The benchmark 10-year

Treasury note lately was up 6/32 to 103 14/32, lowering its yield to 5.287%.

In economic news, the

Employment Cost Index

(

definition |

chart |

source

), which measures what workers are paid in wages, salaries and benefits, rose less than expected, by 0.8% in the fourth quarter of 2000. It is also lower than the 0.9% growth in the third quarter. Economists polled by

Reuters

had forecast a growth rate of 1.1%.

The

initial jobless claims

(

definition |

chart |

source

) rose to 316,000 for the week ended Jan.20, up from 304,000 in the previous week. The rise was lower than the forecast of 339,000. The four-week average dropped for the second straight week, to 336,000.

Existing home sales

(

definition |

chart |

source

) dropped sharply by 7.4% to 4.87 million in December, down from 5.26 million the previous month. The reading is now at its lowest level since last July, and indicates that declining consumer confidence has begun to hurt the housing market.

Finally, the

Consumer Comfort Index

(

definition |

chart ), which measures the consumer's confidence in the economy's future, rose to 17% last week. It is still 18 points below its 12-month high of 35%.

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