October 12, 1994

THE conventional wisdom used to be that a steaming-hot cup of coffee was preferable to a tepid one. But starting the day with a hot cup of coffee -- or tea -- may be hazardous to your health. In August, a jury in Albuquerque, N.M., awarded $2.9 million to Stella Liebeck, 81, who was burned by a cup of McDonald's coffee that she spilled in her lap. The verdict was reduced to $640,000 last month by a state District Court judge, and now both sides are appealing.

A flurry of strong third-quarter earnings reports helped propel the stock market to its largest gain in a month. With corporate leaders like Chrysler, Motorola and Pepsico announcing better-than-expected profits, the Dow Jones industrial average scored its third consecutive double-digit gain, surging 55.51 points. Rising bond prices again allowed the stock market to move higher on its own steam. On the benchmark 30-year Treasury bond, the yield, which moves in the opposite direction from price, fell to 7.86 percent yesterday from 7.90 on Friday. [ Page D21. ]

PATAKI URGES LONGER PRISON TERMS State Senator George E. Pataki, the Republican candidate for governor, called for holding violent criminals in prison longer as the central element of his crime program for New York. 1. NEW YORK CITY

CLIMBING to 14,000 feet above the North Carolina Piedmont, the controls of a six-seater airplane at his fingertips, Franklin Graham set a course to Asheville, in the Blue Ridge Mountains, to pick up his parents. "For a time, Daddy wouldn't fly with me," he said and smiled. Daddy is the Rev. Billy Graham, who, along with Ruth Bell Graham (Billy's wife and Franklin's mother), was coming to see him preach that night in Raleigh.

The Nobel Memorial Prize in economics will be divided among three pioneers in the field of game theory. The award underscores a radical shift in thinking, as classical economics -- with its focus on how markets behave -- gives way to game theory, an approach that focuses on the give and take among "players." Business Day, page D1.