The Dow got a great start this morning and ended on a roll at midafternoon, racking up over 200 points in gains on growing optimism over an interest-rate cut at tomorrow's Federal Open Market Committee meeting. Last week, the blue-chip index was trashed as worries over soft fourth-quarter earnings and a possible recession intensified.

The Nasdaq was stubbornly ambling towards its closing low for the year of 2597.9, however. Internet and PC-making stocks stumbled as fears over a slowdown in capital spending and concerns over the sustainability of some Internet companies continue to grow. A downgrade on e-commerce companies from

Goldman Sachs

didn't help Internet stocks much and

TheStreet.com Internet Sector

was down 4.8%.

An article in

The Wall Street Journal

this morning helped boost blue-chip optimism over interest rates. That article said that the Fed is considering taking a more aggressive stance on the economy and issuing an interest rate cut. Some investors were already expecting an interest rate cut, but most economists were not. Investors -- spooked by the flood of companies warning they expect to miss earnings targets -- want an interest rate cut to put some pick-me-up back into the economy. Lower interest rates spur growth by encouraging corporate and consumer spending.

A smattering of old industrials and financial titan

J.P. Morgan

(JPM) - Get Report

were the Dow's big winners today. So far, J.P. Morgan has had a pretty fantastic month, winning back almost all of what it lost in November. Investors punished banks and brokerages in November on fears of growing loan risk. J.P. Morgan was up 4.1%, adding 40 points of upside to the Dow. Citigroup also helped, up 2.7% and adding 8 points to the index.

In fact, interest-rate-sensitive financials were rising everywhere. The

Philadelphia Stock Exchange/KBW Bank Index

was up 4.1%, the

S&P Insurance Index

was rising 2.7% and the

American Stock Exchange Broker/Dealer Index

was 1.7% higher.

Investors were picking over some beaten down tech stocks, like

Qualcomm

(QCOM) - Get Report

, semiconductor leader

Intel

(INTC) - Get Report

and PC-maker

IBM

(IBM) - Get Report

.

Still, bad news about corporate profits hadn't let up any. Earlier today, media giant

Time Warner

(TWX)

announced that it was lowering its earnings growth estimates for 2000 due to reduced cable network advertising revenue, weaker music sales and disappointing box office sales.

America Online

(AOL)

, Time Warner's merger partner, said it would meet Wall Street's forecasts for advertising and commerce revenue, however.

Time Warner was off 13% to $63.25, while America Online fell 13.7% to $42.24.

Elsewhere in the technology sector,

Sun Microsystems

(SUNW) - Get Report

continued to hit new 52-week lows. The company was downgraded today by Prudential, which cited slowing demand for the company's business computers. Sun Microsystems was off 6.2% to $28.56. Rumors have been circulating in the past week that the company may announce it expects to miss its earnings targets, though the company denied any such thing on Friday.

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Sector Watch

Wireless stocks were taking a beating today as the top bidders in the 9th round of the U.S. wireless auction were announced.

EMC

(EMC)

was down 4.1%,

Ericsson

(ERICY)

was 4.7% lower and

Voicestream

(VSTR)

was face flat on the floor, down 3.9%. EMC just announced a search software storage pact deal with Internet incubator

CMGI

(CMGI)

.

Defensive stocks like paper, drugs, tobacco and utilities, were all creeping steadily higher today. Many tech sectors were also higher, however, including biotechnology and semiconductors.

A boost in gas and oil prices has fueled the energy and transport sectors this afternoon. The

American Stock Exchange Natural Gas Index

was up 3.3%, while the

Dow Transportation Index

was ahead 1.7%.

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Bonds/Economy

Treasury prices were sharply higher based on optimism that the Fed will lower interest rates, if not at its meeting tomorrow, then soon afterward. The rally is dropping yields to new lows for the year. The benchmark 10-year

Treasury note lately was up 7/32 at 104 15/32, lowering its yield to 5.158%.

The odds rose that the Fed will lower interest rates either tomorrow or at its subsequent meeting in January following a report in today's

Wall Street Journal.

The paper reported that the Fed's monetary policy arm, may skip a step in the process that could eventually lead it to lower rates. The FOMC, which has been expected to issue a statement declaring the risks to the economy balanced between rising inflation and too-slow growth, is considering declaring too-slow growth the paramount risk, the paper reported. The committee might even lower the fed funds rate tomorrow, the Journal said.

Traders of fed fund futures are discounting 52% odds that the rate will fall to 6.25% tomorrow from 6.5% currently, up from 41% on Friday. There is no economic news today.

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