UPI NewsTrack Business

U.S. markets likely in holding pattern

NEW YORK, Aug. 4 (UPI) -- U.S. markets will likely tread water for three days as investors wait for word from the U.S. Federal Reserve on their next interest rate decision.

The Fed's Open Market Committee meets Tuesday in what is usually a two-day meeting with a decision announced Wednesday afternoon.

That puts investors in a three-day vigil.

Most investors say they expect no change, The Wall Street Journal and others reported Monday.

The Fed lowered key lending rates to 2 percent in April, a move focused on restoring liquidity in financial concerns. Since then, inflation has become the larger concern, rising 5 percent in June over year ago levels.

In midmorning trading Monday, the Dow Jones industrial average fell 63.59 points or 0.56 percent to 11,262.73. The Nasdaq composite index dropped 16.71 points or 0.72 percent to 2.294.25. The Standard & Poor's 500 lost 7.83 points or 0.62 percent to 1,252.48.

The 10-year Treasury note lost 6/32 to yield 3.94 percent.

The dollar was mixed. The euro traded at $1.5593 against Friday's close of $1.5541, while the dollar traded at 108.1 yen from Friday's 107.75 yen.

In Tokyo, the Nikkei average lost 161.41, off 1.23 percent, to 12,933.18.

California insurance bill nears completion

SACRAMENTO, Aug. 4 (UPI) -- The state of California is nearing a compromise on legislation that would tighten controls on individual medical insurance policies, sources said.

The bill aims to restrict profit on individual policies, mandate a minimum for benefits and regulate insurance companies' ability to cancel plans retroactively, the Los Angeles Times reported Monday.

The plan falls short of Gov. Arnold Schwarzenegger's original plan of providing insurance for 5 million uninsured Californians, the Times reported.

State law makers rejected Schwarzenegger's $14.9 billion insurance plan in January, although insurance companies backed the bill, as it would have provided them with millions of new customers, the report said.

The new bill has little support from insurers because it crimps profits on some of their most lucrative policies, the Times reported.

A 2006 survey found that individual policies cost an average $259 per month, compared with $383 per month for policies purchased by small businesses for their employees.

Individual policy owners, however, paid three times the amount the group policy members paid for deductibles and co-payments, the Times reported.

Fed caught between inflation and jobs

WASHINGTON, Aug. 4 (UPI) -- The U.S. Federal Reserve Bank's policy makers are mired in a classic standoff between inflation and jobs, analysts said.

While financial concerns are struggling with problems in mortgage-related securities, the standard formula to restore liquidity in financial firms is for the Fed to lower interest rates -- as they did seven times from September to April, lowering key rates to their current level of 2 percent, USA Today reported.

The jobless rate also rose last month to 5.7 percent and lowering rates can put more liquidity into banks and then into companies, which often stimulates hiring.

But, a boost to spending also encourages inflation, which rose 5 percent in June over the previous 12 months, its fastest rate in 17 years, the newspaper reported.

Members of the Fed's Open Market Committee, which votes on interest rates, "are very uncomfortable," Kim Rupert, managing director of Action Economics told the newspaper.

Many analysts say they expect the Fed to take a wait-and-see approach at their next meeting, which begins Tuesday.

The Fed likely will start raising interest rates in 2009, when the economy is "weak, but not getting weaker," Conrad DeQuadros of RDQ Economics told the newspaper.

Fees precede transactions at some banks

NEW YORK, Aug. 4 (UPI) -- Some U.S. banks are charging overdraft feels before accounts are technically overdrawn, sources said.

Bank of America , TD Banknorth and SunTrust are charging fees for customers who sign for purchases using a debit card if there are insufficient funds in the account at the time they sign for the purchase, USA Today reported Monday.

But, the previous system allowed customers to make a deposit on those accounts that would cover the purchase before the transaction actually cleared.

The new practice is "another way (for banks) to manipulate account holders to spur more overdraft fees," said Leslie Parrish, a researcher at the Center for Responsible Lending.

Banks argue the new system gives customers more precise information about their balances, USA Today said.

Bank regulators are looking at overdraft practices with the U.S. Federal Reserve Bank contemplating an option of allowing customers the right to demand banks refuse transactions that result in overdrafts, the newspaper reported.

"There's a point when consumers say enough is enough, and I think they're saying that now," Michal Moebs, founder of consulting firm Moebs Services, told USA Today.