After an early morning spent duffing around in the rough, the market solidly landed on the green with a sweet midday iron shot from the bulls, who've been tangling with bears ahead of next week's huge Federal Open Market Committee meeting.

The bears and bulls are tussling over the American economy, naturally. One side points to the current slate of disappointing earnings, weak economic data and eroding consumer confidence levels and sees a grim, gray horizon. The other sees the


set to cut rates again,

George W. Bush

(and his promised tax cuts) established as President and says earnings warnings are already priced in to a market made well aware of economic trouble during a flood of December preannouncements.

So, which is it? Only time can tell, but more and more people are leaning towards the

Federal Reserve cutting rates by 50 basis points when it meets for two days on Jan. 30 and Jan. 31. Right now, the February

fed funds futures contract, traded on the

Chicago Board of Trade

, is factoring in an 86% chance that the Fed cuts rates by 50 basis points at the end of the month. That's a slip of nearly 10 percentage points from earlier this morning.

Feet are getting colder ahead of Fed chief

Alan Greenspan's talk to the


on Thursday, just two trading days before the FOMC meeting. Despite the upswing, markets are really treading water, waiting for more news from the Fed that will indicate which way the cuts will go. Despite the fact that the speech could be nothing more than vague economic notions that an oversensitive market will endlessly dissect, make no bones about it, when Greenspan speaks -- it's pretty important.


Dow Jones Industrial Average and

Nasdaq Composite Index were both not far from session highs at the close. The Dow reacted to major earnings news, while the Comp barely got by on the still-strong biotechs.


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


Johnson & Johnson

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

, with a fourth-quarter earnings release that, although in line with estimates, disappointed people because Merck's newer drugs showed amazing sales growth but not amazing earnings growth. Merck is guilty of not matching previous performance, since it exceeded estimates in the past two quarters. Merck fell $2.75 to $79.56.

Johnson & Johnson, the Band-Aid and baby shampoo king, beat the Street by a penny, announcing fourth-quarter earnings of 65 cents a share while saying it was comfortable with 2001 earnings projections. Despite the good news, the stock was still pressured by the Merck release. Johnson lost early strength and felt Merck-related pressure, dropping $1.63 to $92.69.

American Express

(AXP) - Get American Express Company Report

led the winners today, one day after it said 2001 earnings would be soft when releasing in line fourth-quarter results. Usually that kind of news is bad for a stock, but it was upgraded to a buy at

Merrill Lynch

and added to the firm's Focus 1 list with a price target of $60, since analyst Michael Hughes is bullish on financials as a whole and would use this weakness as a buying opportunity in the face of future Fed cuts.

American Express gained $1.50 to $46.50, with


(MMM) - Get 3M Company Report

another notable winner, gaining $2.13 to $111.


(BA) - Get Boeing Company Report


United Technologies




(WMT) - Get Walmart Inc. Report

were also higher.

That's not to say that certain sectors and companies weren't attracting attention. The

American Stock Exchange Biotechnology Index

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rose 5%, gaining for the second-straight day, while most of tech shook off early weakness to kick out the jams into the afternoon.

The big guns were mostly mixed at midday, before investors reloaded. Now the large-cappers are banging.


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Sun Microsystems

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, both break-even for much of the day, had lately swung to the upside, joining


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(INTC) - Get Intel Corporation (INTC) Report



(DELL) - Get Dell Technologies Inc Class C Report


As a result, the

Morgan Stanley High-Technology 35 Index

, which tracks these widely-held names, rose 2.1%.

Health maintenance organizations, better known as HMOs to the common folk, were rocking and rolling, with the

Morgan Stanley/American Stock Exchange HMO Index

gaining 8.5%. Natural gassers and oil service stocks outpaced the rest of the commodity-related stocks, gaining close to 3%.

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Sector Watch

Disk drive peripherals were stronger, as were the dot-coms, with the

American Stock Exchange Disk Drive Index

gaining 3.1% and the Internet Sector Index

gaining 6.4%.

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Treasuries failed to rally for a second-straight day after rumors surfaced that the Fed was still contemplating a 25-basis point cut, not the 50 that Wall Street is banking on. In the last couple of weeks, all this Fed speculation has shifted about wildly. The February

fed funds futures contract, traded on the Chicago Board of Trade, factors in an 86% chance that the Fed cuts rates by 50 basis points at the end of the month. That's a slip of nearly 10 percentage points from earlier this morning. Last week, that percentage was as low as 50%, which only shows, the more things change

Institutional investors await critical economic developments due later this week. The markets will have more to react to in a couple of days when employment data and the latest comments by Federal Reserve chairman Alan Greenspan become public. Bond prices were also lifted a bit after the Bank of Canada lowered interest rates by 25 basis points. The yield curve remains steep, with the difference between the two-year note and the long bond yields about 0.8%.

The benchmark 10-year

Treasury note lately was off 10/32 to 103 18/32, raising its yield to 5.270%.

In economic news, the

BTM-UBSW Weekly Chain Store Sales Index


definition |

chart ) fell 0.7% in the week ending Jan. 20, after a 0.3% drop in the prior period. The loss is attributed to adverse weather on Saturday, considered the week's strongest shopping day, as well as to people staying home to watch the presidential inauguration. The year-to-year sales average is healthier with a 3.1% growth, though it is lower than the 4.9% recorded 12 months ago.


Redbook Retail Average


definition |

chart ) found January sales running 2.4% ahead of December, narrowly exceeding a target of 2.3%. They were also 3.4% ahead of the previous January. However, this is the month when stores clear inventories, so most of the current sales will probably result in low profit margins. A more accurate reading of consumer spending will be obtained by the second quarter of this year, after the proposed tax cuts, interest rate corrections and rounds of mortgage refinancing have been completed.

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