(Updated from 9:45 a.m.)

After pulling off their first real rally in a month yesterday, the bulls were retreating. Investors were able to ignore bad earnings news Monday, but they're not doing it again today.

The

Dow Jones Industrial Average was dropping, lately off 50 to 10,591. The

Nasdaq Composite Index fell 47 lower to 2261. And the

S&P 500 moved down by 8 to 1260. They fell lower after the latest

consumer confidence numbers showed another drop in sentiment.

Merrill Lynch

had nothing nice to say this morning about PC maker

Gateway

(GTW)

or about hopes for an economic rebound in the second half of this year. Merrill analyst Steven Fortuna said he expects Gateway to drop its forecast for earnings per share this year to "well below" Wall Street consensus estimates of $1.28 for 2001. "If the outlook goes down 30% to 40% percent, the stock could easily follow it," Fortuna wrote. Gateway was falling 3.5%.

Fortuna also said a rebound in consumer demand in the second half of 2001 is unlikely. As so-called visibility issues crop up, a growing number of companies and analysts have begun to stretch their forecasts for an economic rebound into next year.

Nike

(NKE) - Get Report

was also a casualty this morning, off 17.8%, after the athletic-shoe maker

lowered its fiscal third-quarter earnings projections. The culprit -- sluggish footwear sales and software problems that made it hard for the company to track inventory. Nike's admission of its software problems was hurting shares in business-to-business softwaremaker and Nike supplier

i2 Technologies

(ITWO)

. It was off 12.5%.

And wireless-communications equipment maker

Sawtek

(SAWS)

was inching southbound after warning that it would miss consensus analyst estimates for its earnings and revenue for its fiscal second quarter. It was off 0.4%.

The latest series of estimate revisions signal an early and unwelcome start to "warning" season for the first quarter. Companies that do not expect to make their earnings targets often warn investors well before the reporting season begins.

Pretty much in-line with forecasts, this morning's

durable goods orders report didn't wag sentiment much.

The report showed that

demand for big-ticket goods fell sharply in January, as expected. The headline number fell 6% last month compared to a revised 1.2% rise in December, mostly due to volatile defense aircraft orders. Economists polled by

Reuters

had forecasted a 3% drop for the month. It's not a great report. Aircraft orders accounted for much of the weakness in the headline number, but durable goods excluding transportation still fell 0.3%, putting them down 5.6% year-over-year. Nondefense capital goods ex-aircraft is flat year-over-year.

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Investors are looking closely at the data reports this morning after rumors emerged Friday that the

Federal Reserve plans to cut interest rates this week, well ahead of its next official meeting on March 20. Skeptical investors want to know if that theory holds any water, because the two rate cuts in January have done seemingly little to give the the market the sustained boost it seems to need. Today's data parade will help shape the debate. But

TheStreet.com's

Justin Lahart wrote a recent analysis that says investors

shouldn't hold their breath for a cut before the next Fed conclave.

Still, investors may be wary ahead of Fed Chairman

Alan Greenspan's speech before the House of Representatives tomorrow. Greenspan first delivered this semiannual testimony -- formerly called the

Humphrey Hawkins -- before the Senate on Feb. 15, and was expected to repeat it unchanged tomorrow before the House. But the Fed has since confirmed that he has rejiggered his testimony.

But it's hard to know in what direction Mr. G may have altered his testimony. He could now be leaning more heavily towards aggressive interest-rate cuts in order to stem the downward spiraling in consumer confidence. As consumer confidence levels deteriorate, so does already weak consumer spending. And retail spending is a major force of the U.S. economy. But Greenspan might also soften his stance on interest-rate cuts. Recent economic data has indicated that economic growth and inflation in both wholesale and consumer prices picked up during January.

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Bonds/Economy

Treasury prices were rallying this morning, with the benchmark 10-year

Treasury note up 6/32 to 99 28/32, yielding 5.016%.

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International

London's

FTSE

was up 34 to 5951 around the midday trading day. Financials, especially the banks and insurers, were up as traders speculate about a possible rate cut here in the States. Over on the continent, Paris'

CAC

gained 25 to 5440, while Germany's

Xetra Dax

rose 49 to 6238.

The euro was lately trading at $0.9153.

Asia wasn't nearly as lovely, especially Tokyo's

Nikkei 225

, which fell 141.3 to 13,059.9, dropping to a 28-month closing low as chipmakers slumped and banking stocks, the only real support to the index's upside movement, succumbed to profit taking. Monday's warning from

Texas Instruments

(TXN) - Get Report

didn't help much, either.

Hong Kong's

Hang Seng

also slunk into the close, dropping 395.5 to 14,834.7.

The dollar was trading at 116.31 yen.

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