Dow Jones Industrial Average is rallying today, thanks to some comments from Fed Chairman

Alan Greenspan after his

testimony that helped support market sentiment that the Fed will cut interest rates by 50 basis points next week.

His speech to the

Senate Budget Committee

was running along at a typically

thumb-twiddling pace until Greenspan mentioned the economy was near "zero growth." He said the current inventory correction was dampening growth, which seemed to indicate that the fed funds futures contract, currently betting on about an 88% chance that the Fed cuts rates by 50 basis points, might be correct.

As a result, two-year Treasury notes, which react in anticipation to Fed action, rallied, raising prices and dropping their yields in estimation that the Fed will loosen credit. The Dow stocks have also rallied on the notion that this expected action next Wednesday will help spur growth in coming months. Meanwhile, the

Nasdaq Composite Index is mired in the red after fiber-optics company


(GLW) - Get Corning Inc Report

sounded uncertain about sales in coming quarters. The selling today continues a mini-shift of capital away from riskier technology sectors toward defensive-oriented plays, such as insurance, health care and tobacco stocks.

Right now, the fed funds futures contract traded on the

Chicago Board of Trade

is discounting an 88% chance that the Fed cuts rates by 50 basis points to 5.5% next Wednesday. Earlier today, that proxy, which serves as the best indication for how futures markets believe the Fed will act, was factoring in just an 83% chance.

The biggest issue hitting the Comp today concerns

telecom suppliers, particularly Corning, telecom equipment maker

JDS Uniphase


, networking equipment company

Nortel Networks


, and (who could forget) communications-equipment maker




Last night Corning announced that it

beat estimates, but then warned of softening sales in the first quarter. This morning, JDS Uniphase was downgraded by

Salomon Smith Barney

to outperform from buy due to issues involving demand.

Lately, Corning and Lucent were the most actively traded stocks on the

New York Stock Exchange and were down 17.8% to $57.63 and 7% to $18.25, respectively. JDS Uniphase was falling 10.7% to $56.25 and Nortel was 6.3% lower to $37.50.

The Dow was aided and abetted by the defensive names in the index, including the drug stocks. Pharmaceutical


(MRK) - Get Merck & Co., Inc. (MRK) Report

and health care products giant

Johnson & Johnson

(JNJ) - Get Johnson & Johnson (JNJ) Report

were both stronger. Together, these blue chips were adding close to 30 points to the Dow's positive side.

Among the other strong Dow stocks were

United Technologies


, up 3.8%, and


(MMM) - Get 3M Company Report

, gaining 1.6%. Winners were ahead of losers 15-11 on the

New York Stock Exchange, and losers were ahead 20-16 on the Nasdaq.

Sector Watch

Utilities and energy stocks were bouncing after the White House extended two federal emergency orders through Feb. 6, requiring out-of-state energy firms to sell surplus electricity and natural gas to California utilities to help avoid blackouts.

Also giving the sector a jolt was a move by

Merrill Lynch

, upgrading

Edison International

(EIX) - Get Edison International Report

TheStreet Recommends



(PCG) - Get PG&E Corporation Report

to accumulate from neutral. Edison's Southern California unit announced Wednesday that it would not voluntarily file for bankruptcy and has enough cash to last until Feb. 2. Edison lately was climbing 25.3% to $11.75, while PG&E was 19.5% higher to $11.88.


American Stock Exchange Oil & Gas Index

was up 2.3%, the

American Stock Exchange Natural Gas Index

was moving up 2.6% and the

Dow Jones Utility Average

was jumping 1.7%.

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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 |


), 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


had forecast a growth rate of 1.1%.


initial jobless claims


definition |

chart |


) 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 |


) 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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Listen to JDS Uniphase's (JDSU)


columnists in real time in an exclusive chat at 4:00 p.m. EST. In a special event at

, you can listen to a Web cast of the earnings call while simultaneously chatting with James J. Cramer, Adam Lashinsky and Jim Seymour in a Columnist Conversation as they comment on the call.