The announcement of his departure Tuesday came after the world's largest brokerage posted a $2.24 billion quarterly loss, its biggest since being founded 93 years ago. Merrill Lynch did not name a replacement for O'Neal, whose ouster had been expected, and who leaves the company with benefits worth $161.5 million.

Laurence Fink, the chief executive of investment manager BlackRock Inc., turned down an initial overture from Merrill's board but is in active negotiations, according to a person with direct knowledge of the offer who was not authorized to speak publicly. With the presumed front-runner out of contention, filling the top spot at Merrill Lynch is not expected to be easy given the remaining unknowns from the global credit crisis.

Any replacement will face the daunting task of cleaning up investments in subprime mortgages and other risky types of debt, and rebuilding an investment house badly bruised.

There is speculation by a number of analysts that Merrill Lynch faces a $4 billion writedown during the fourth quarter. This would be on top of a $7.9 billion charge taken last quarter, a stunning amount since Merrill originally said it would write down only $4.5 billion because of credit market turmoil.

O'Neal was also criticized for reportedly approaching Wachovia Corp. about some kind of merger without the approval of his board.

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NEW YORK (AP) — Wall Street pulled back Tuesday as investors uneasy after a drop in consumer confidence traded cautiously ahead of the Federal Reserve's rate decision.

After the Fed's half-point reduction in September, most investors expect the central bank to deliver a quarter-point cut at the conclusion of its two-day meeting on Wednesday.

But inflation remains a threat. Crude oil prices fell Tuesday, but only after hitting a record a day earlier, and meanwhile, the dollar has been tumbling. So a rate cut — much less additional decreases in the coming months — is not a given.

Some on Wall Street fear economic growth could halt if rates aren't lowered, given the troubles in housing and credit. The statement the Fed issues alongside its rate decision will be closely read for clues about future moves.

Most earnings have been coming in better than expected over the past few weeks, particularly in the technology sector. But consumers, the key drivers of the economy, appear to be flagging.

Following last week's news of a significant decline in existing home sales and Standard & Poor's report Tuesday of home prices sinking further, the Conference Board said its index of consumer confidence fell to its lowest level in two years in October. The index came in at 95.6, below the consensus estimate of 99.5 and down from a revised reading of 99.5 in September.

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NEW YORK (AP) — With Christmas only about eight weeks away, shoppers are feeling more forlorn about the economy than they have since hurricanes Katrina and Rita battered the Gulf Coast two years ago.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. It was the lowest reading since 85.2 in October 2005 when gas and oil prices soared after the hurricanes deluged New Orleans and shut down a large chunk of the nation's oil refineries. Analysts had expected a reading of 99.5 Tuesday.

For retailers, the consumer confidence report, which showed its third monthly decline in a row, heightens worries that the holiday shopping season will be challenging after a disappointing fall. For investors, it raised concerns that consumers' growing wariness was another sign that the economy may be slowing too much. Consumer spending accounts for two-thirds of U.S. economic activity.

The report helped nudge stocks lower as Wall Street waited warily for a decision on interest rate policy from the Federal Reserve, which is meeting Tuesday and Wednesday. The Dow Jones industrial average dropped 55.84, or 0.40 percent, to 13,814.42.

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CINCINNATI (AP) — Consumer products makers Procter & Gamble Co. and Colgate-Palmolive Co. reported big jumps in quarterly profits Tuesday. But the stocks of both companies headed in opposite directions after P&G issued a cautious outlook amid rising commodity costs and U.S. consumer uncertainty.

Shares of New York-based Colgate rose 1.4 percent after the maker of Colgate toothpaste, Palmolive dishwashing liquid and Irish Spring soap posted a 22 percent increase in profit for the third quarter. Shares of its bigger Cincinnati-based competitor, whose brands include Tide detergent, Gillette shavers and Crest toothpaste, dropped by 4 percent after P&G reported a 14 percent profit rise for its first fiscal quarter.

Colgate's earnings climbed to $420.1 million, or 77 cents per share, for the quarter ended Sept. 30 from $344.1 million, or 63 cents per share, the previous year. Excluding restructuring and other charges, earnings totaled $466.4 million, or 86 cents per share, compared with $402.6 million, or 73 cents per share, a year earlier.

On that basis, analysts surveyed by Thomson Financial expected net income of 85 cents per share on sales of $3.48 billion.

Quarterly revenue rose 12 percent to $3.53 billion from $3.14 billion in the prior year, Colgate said.

P&G, meanwhile, said net income grew to $3.08 billion, or 92 cents per share, from $2.7 billion, or 79 cents per share, a year ago. Excluding a German tax benefit of 2 cents per share, the company earned 90 cents per share in the latest period, a penny more than analysts expected.

Sales rose 8 percent to $20.2 billion from $18.79 billion a year ago. Analysts surveyed by Thomson Financial expected revenue of $20.23 billion.

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OVERLAND PARK, Kan. (AP) — Shareholders of the bar-and-grill chain Applebee's International Inc. on Tuesday approved a $1.9 billion buyout offer from pancake house operator IHOP Corp.

More than 70 percent of the company's shares voted to approve the agreement, which critics said shortchanged shareholders.

Under terms of the deal, shareholders of Overland Park-based Applebee's will be paid $25.50 per share, a 4.6 percent premium over its closing price on the day before the offer was announced.

Glendale, Calif.-based IHOP is also assuming $155 million in Applebee's debt as part of the deal.

The sale is expected to close by Nov. 29. The combined company would have $6.8 billion in annual sales and more than 3,200 restaurants.

Officials at both companies have characterized the deal as a way to help rejuvenate Applebee's, one of the nation's largest restaurant chains. Its profits and sales have fallen in the past year as rising fuel and housing costs and changing consumer behavior have reduced traffic in its dining rooms.

The deal is viewed as a coup for IHOP, which is smaller than Applebee's but has had success in building its own brand and sales in the face of economic headwinds.

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MILWAUKEE (AP) — Midwest Air Group Inc. moved a step closer Tuesday to ending its yearlong effort to fend off a hostile takeover by AirTran Holdings Inc. when shareholders approved a sale to private equity firm TPG Capital.

Nearly all votes cast by Midwest shareholders approved the sale, worth $450 million in cash, company officials said at a special shareholder meeting.

The only hurdle left is scrutiny by antitrust regulators. They must approve the Midwest Airlines sale because it includes rival Northwest Airlines Corp. as a passive investor. TPG will own Midwest, but Northwest put up nearly half of the money.

Midwest Chairman and Chief Executive Timothy E. Hoeksema said he expects the deal will be cleared by the government and the sale will close by the end of the year.

Shares of Midwest rose 8 cents to close at $16.24 Tuesday, while Northwest shares were up 66 cents, or 3.7 percent, to end at $18.30.

Midwest agreed in August to be bought out by TPG for $17 a share in cash. It has about 26.6 million shares outstanding.