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Consumer confidence fell sharply in October, reinforcing hopes that the Federal Reserve would not have to raise interest rates to brake the economy. Today's report helped lift stocks out of a deep morning slump.

The Conference Board said consumer confidence, an important measure of consumers' propensity to spend, dropped 7 points in October to 123.3 from September's 130.2.

Both widely watched components of the index, which is compiled by a private business group in New York, fell in October. The present situation index, designed to measure consumers' current assessment of the economy, declined to 147.4 from 157.6. The expectations index, which attempts to measure consumers' level of confidence in the future, fell to 107.3 from 111.9.

In another report today, the Labor Department said wages and benefits paid to American workers rose a moderate 0.8 percent in the July-September quarter, another sign inflation in the labor market remains relatively contained. The increase in total compensation followed an identical gain in the previous quarter.

Yields mixed on Treasury bills

WASHINGTON (AP) -- Interest rates on short-term Treasury securities were mixed in Monday's auction.

The Treasury Department sold $10.6 billion in three-month bills at an average discount rate of 4.97 percent, up from 4.96 percent last week.

Another $11.6 billion was sold in six-month bills at an average rate of 5.08 percent, down from 5.15 percent.

The Federal Reserve said the average yield for one-year Treasury bills rose to 5.53 percent last week from 5.52 percent the previous week.

Dow Jones cutting off AOL

DULLES, Va. (Bloomberg) -- Dow Jones & Co. said it will stop providing its business news to America Online Inc.'s subscribers after Dec. 31, blaming the online service's policy of reducing compensation to information providers.

"Given the significant editorial resources required to produce Dow Jones Business Center each day, this strategy makes it impossible for us to continue the area," Timothy Andrews, editor of online services for Dow Jones, said in a letter to the America Online's subscribers.

Dow Jones' decision to leave AOL follows the No. 1 online service's adoption a year ago of flat-rate pricing, which meant there was less subscriber revenue to go around. It also underscores the dwindling need for the service to pay hefty fees to its information and content providers, analysts said.

Microsoft defends its browser plans

WASHINGTON (AP) -- The Microsoft Corp. said Monday that the Justice Department has known for more than three years of its plans to embed Internet browsing software in its Windows computer operating system.

The company said it inserted language into a 1995 consent decree with the government to authorize the very step that the government now alleges violates that two-year-old court order.

Union Pacific rescue considered

WASHINGTON (AP) -- The government warned Tuesday it may be forced to step in to rescue Union Pacific Railroad from problems that have snarled shipments along the nation's largest railroad from the Gulf of Mexico to the West Coast.

"Sometimes government must intervene, and the extent of the rail service problems . . . suggest that this may be one of those times," said Linda Morgan, head of the Surface Transportation Board. "It may be that we can no longer wait for the private sector to resolve this matter."

In other business news

Silicon Graphics Inc. on Monday reported its third-quarter loss widened to $55.7 million, or 31 cents per share, hurt by slack sales of its computers that run networks of business machines. That was wider than the loss of $21.6 million, or 13 cents per share, the company reported in the year-ago period. Revenues rose slightly to $768.0 million from $765.6 million.

Swiss pharmaceuticals giant Roche announced Monday it might cut 4,000 to 5,000 jobs worldwide over the next two to three years.

ABC News on Monday appealed a federal jury's decision to award punitive damages to supermarket chain Food Lion for a hidden-camera expose, even though the trial judge had already reduced the award from $5.5 million to $315,000.

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