S&P later confirmed the reports, announcing after the closing bell that it's placed the long-term sovereign ratings of 15 eurozone members on "creditwatch with negative implications." The Dow Jones Industrial Average settled up 78 points, or 0.7%, at 12,098. Financial stocks JPMorgan Chase and Bank of America led the gains for the blue-chip index, closing around 3% higher. The S&P 500 added 13 points, or 1%, to finish at 1257 and the Nasdaq Composite rose 29 points, or 1.1%, at 2656. More than 4 billion shares changed hands on the New York Stock Exchange and about 1.69 billion on the Nasdaq. "Today's creditwatch placements are prompted by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole," said S&P in its report, which impacted several triple-A rated countries.
"Currently, we expect output to decline next year in countries such as Spain, Portugal and Greece, but we now assign a 40% probability of a fall in output for the eurozone as a whole." The rating agency says it expects to conclude its review on the eurozone sovereign ratings as soon as possible following the European Union summit scheduled for the end of this week. A negative outcome from the meeting could see ratings lowered by up to one notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and by up to two notches for the other governments.
As Standard & Poor's placed the long-term triple A sovereign rating for Germany, the eurozone's largest economy, on its negative watch list, the rating agency said it's possible "these eurozone-wide issues [could] permanently constrain the availability of credit to the economy, Germany's economic growth outlook-- and therefore the prospects for a sustained reduction of its public debt ratio -- could be affected." Similar comments were made about the rationale for placing the long-term triple A ratings of the eurozone's second largest economy, France, and Luxembourg on the negative watch list.
Greece wasn't included in today's S&P ratings watch. Stocks were positive early as investors cheered the likelihood of a unified European plan for budget and debt crisis control and shrugged off tepid U.S. economic data. After a meeting in Paris, German Chancellor Angela Merkel and French President Nicolas Sarkozy called for changes to the European Union treaty that would allow for stronger fiscal discipline, integration and budget alignment across the eurozone. They hoped the changes would be ready for approval by March.
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