On the first day of the year a small steamer was seen from Fort Pickens making her way toward the Navy Yard. She was a saucy, defiant looking craft, and some one on board waved a secession flag ostentatiously in sight, as if challenging a fire. This was an exasperating insult to the restive men shut up in the fort. Colonel Brown had frequently warned General Bragg against forcing the presence of these insolent steamers upon him, and when this presumptuous little craft approached Fort Pickens, with its flag in commotion, he opened fire upon her. She drew in her flag and retreated instantly with a crestfallen, retrograde movement, in amusing contrast with her first approach. The fire from Fort Pickens was directly answered by all the rebel batteries, and in a brief time the engagement became general. The firing on both sides was kept up through the entire day, and at night Pickens maintained a slow fire from her thirteen-inch mortars, which was promptly returned by the rebels. About midnight a conflagration broke out in the Navy Yard. It flamed up furiously, consuming the buildings of the Yard, and spreading to the town of Woolsey, adjoining the Navy Yard on the north, where it raged all night. The scene during the night was wonderfully magnificent. Every shell could be tracked in its course through the air from the moment it left the gun until it exploded, scattering destruction all around. These shells, rising up against a cloud of surging flame, which sent its red light in a continued glare landward and seaward, formed an appalling spectacle. The minutest outline of the grim fort seemed sketched on a back-ground of fire, rendering the light which Colonel Brown hung out from its walls, in scornful bravado, offering a sure mark to the enemy, scarcely more than one of the ten thousand sparks that filled the atmosphere with gleams of gold. Far off over the beautiful land the light of that conflagration spread, filling the inhabitants with alarm; and so brightly did it flame over the ocean, that the United States steamer Mercedita floated in the glow of its ruddy light when over twenty miles at sea. Through the heat of this conflagration the guns kept up their slow booming thunder, adding to the sublime interest of the scene. The firing on both sides was remarkable for its extreme accuracy. Shells in countless numbers fell inside of Fort Pickens, and were returned with double vigor by its guns. All the batteries were engaged, and did their work admirably. Fort McRae, which had been so roughly handled by the Federal squadron at the last engagement, resumed its accustomed vigor, and Battery Scott kept up a constant fire throughout the engagement. Several ships of the squadron were present, but took no part in the fight. It was well they did not, for nothing could have been gained, and probably much would have been lost had they attempted to oppose their wooden sides to stone walls and earthworks.