By JEANNINE AVERSA
Associated Press Writer

WASHINGTON (AP) -- With the economy moving ahead and the nation's payrolls picking up a bit, Federal Reserve policy-makers boosted short-term interest rates for a third time this year - but left economists split about when the next increase might come.

Fed Chairman Alan Greenspan and his Federal Open Market Committee colleagues - the group that sets interest-rate policy - increased the target for the federal funds rate from 1.50 percent to 1.75 percent. The funds rate is the interest banks charge each other on overnight loans and is the Fed's primary tool for influencing economic activity.

Reacting to the Fed's decision, Wells Fargo said it was increasing the prime lending for many short-term consumer and business loans from 4.50 percent to 4.75 percent. Other commercial banks were expected to follow suit.

Housing Construction Highest in 5 Months

By JEANNINE AVERSA
Associated Press Writer

WASHINGTON (AP) -- Housing construction in August surged to its highest level in five months, a dose of encouraging news for the economy's expansion.

The number of housing projects launched by builders clocked in at a seasonally adjusted annual rate of 2 million units, a 0.6 percent increase from July's level, the Commerce Department reported Tuesday.

The 2 million-unit pace of housing construction registered in August was the highest since March and was better than analysts were expecting. They were forecasting housing construction to decline last month, in part because of hurricanes and bad weather in parts of the country.

"We repeatedly underestimate the vigor and resilience of housing demand," said Steve Stanley, chief economist at RBS Greenwich Capital. "As it turns out, neither wind nor rain nor flooding can keep the homebuilder from completing his or her appointed rounds."

Stewart Ordered to Prison Within 3 Weeks

By ERIN McCLAM
Associated Press Writer

NEW YORK (AP) -- Martha Stewart must report to prison in less than three weeks, a federal judge ruled Tuesday in granting the celebrity homemaker's request to begin serving her sentence for lying about a stock sale. Her namesake company's stock surged 12 percent.

The judge also suggested that Stewart, 63, be assigned to prison camps in Danbury, Conn., or Coleman, Fla. - the two Stewart had requested.

Stewart was allowed to stay out of prison while she appeals her conviction. But she said last week she would surrender anyway in order to "reclaim my good life" and put the ordeal behind her.

The October surrender date means Stewart will likely be out of prison by early March - in time, as she told reporters last week, for spring gardening. She must serve five months of house arrest after prison.

General Mills' First-Quarter Earnings Dip

By JOSHUA FREED
AP Business Writer

MINNEAPOLIS (AP) -- Higher ingredient prices and restructuring costs pushed General Mills Inc.'s first-quarter earnings down 19 percent, the cereal giant reported Tuesday.

For the three months ending Aug. 29, General Mills earned $183 million, or 47 cents per share, on revenue of $2.59 billion. A year ago, the company earned $227 million, or 59 cents per share, on revenue of $2.52 billion.

The maker of Cheerios, Betty Crocker baking mixes and frozen pastries said first-quarter earnings would have been 55 cents per share excluding the cost of closing five manufacturing facilities and other reorganizations. On that basis, the results were a nickel short of the 60 cents per share forecast by analysts polled by Thomson First Call.

Shares of the Golden Valley, Minn.-based company fell 98 cents to close at $45.35 Tuesday on the New York Stock Exchange.

$280B Tobacco Industry Trial Begins

By NANCY ZUCKERBROD
Associated Press Writer

WASHINGTON (AP) -- The nation's biggest tobacco companies worked together for decades to mislead the public about the dangers of smoking, a federal lawyer alleged Tuesday at the start of a civil racketeering trial in which the government seeks a record $280 billion from the industry.

In his opening statement, Justice Department attorney Frank Marine said starting in the 1960s the industry spent hundreds of millions of dollars on organizations set up to counter the growing body of scientific evidence linking smoking to cancer.

He cited internal industry documents showing company executives knew they were trying to deceive the public.

"The problem to them was that the public might stop smoking because of health concerns," he said.

Stocks Close Higher on Brokerage Earnings
NEW YORK (AP) -- Stocks dashed higher Tuesday as investors welcomed strong earnings from financial services companies, upbeat economic data and some reassuring news from the Federal Reserve....

Oil Prices Surpass $47 Per Barrel
WASHINGTON (AP) -- Oil prices hurdled $47 a barrel Tuesday, with further declines in the nation's supply expected in the short-term as petroleum producers disrupted by Hurricane Ivan continue to regroup....