GERMANTOWN, February 1, 1863.

General HAMILTON,

Memphis:

Van Dorn was at Grenada on Monday last. On that day batteries were being moved across the Yalabusha, going north on cars. The trestle-work just below Coffeeville was almost repaired. On same day a considerable body of cavalry camped for some days near Hardee Station, on Memphis and Grenada Railroad. Moved toward Coffeeville. Later information says their trains are running to Water Valley, and they have troops there. Nothing yesterday at Holly Springs.

Tuesday last, steamers Cotton Plant and Ben. McCulloch lay at Panola, on Tallahatchee, loading with corn and stores gathered form the country. Major [G. L.] Blythe's camp is 10 miles northwest of Hernando.

South of Coldwater, in region of Byhalia and Cockrum's Cross-Roads, are from 1,000 to 1,500 cavalry. No immediate design, I think, on this road.

A. L. LEE,

Colonel, Commanding Cavalry.

HEADQUARTERS DISTRICT OF WEST TENNESSEE,
Memphis, Tenn., February 2, 1863.

[Major General U. S. GRANT:]

GENERAL: The Eighty-seventh Illinois Infantry will arrive here to-day. The Tenth Missouri Cavalry is all here but one company. The SECOND Wisconsin Cavalry from Helena, and a battalion First Missouri Cavalry are here. The Fifteenth Regulars from Columbus are here. The First Regulars from Corinth are under orders, and will be here in a day or two. I have ordered the Thirty-fourth Wisconsin (en route) to be stopped at Columbus, and that portion of Thirty-FIFTH Iowa there to go to Tuttle, at Cairo. I think I shall send the Tenth Cavalry, Colonel Cornyn, to Dodge, at Corinth, but Dodge is nearly starved for forage, and I may want the regiment here, for I learn of something every day that confirms the indications that Van Dorn is ready to move on this road as soon as these DIVISIONS of Logan's and Quinby's get away. Undoubted information of yesterday says Van Dorn has returned from Tupelo, and moved across Yalabusha, at Grenada, with considerable artillery, moving on railroad, which is running to Coffeeville. Repairs on railroad were about complete to Oxford.

General Standley reports to me to-day that a noted secessionist near his camp said yesterday that no great resistance would be offered at Vicksburg, but that the rebel army would overrun WEST Tennessee and Kentucky as soon as your forces were diverted down the river. I do not give much credence to such a report, but I have little doubt Van Dorn, with all his cavalry and a DIVISION of infantry, will move on this railroad. If he comes, I hope to make him sick of the experiment.

Quinby seems averse to going down the river, and wished me to speak to you about it. He must tell you his own reasons. I found, much to my surprise, yesterday, an order from your headquarters directing Captain [Asher R.] Eddy to sell all the cotton in Government possession, and it was advertised to be sold to-day. Believing you have not understood the matter fully, I ordered a postponement of sale until you could investigate and decide. It will not do to sell the cotton and pay to the owners 25 cents per pound, the price to be paid by speculators. If the Government has any claim on the cotton, it owns its full value.