By msnbc.com staff and news services

Stocks continued their 2012 rally Monday, barely, as the S&P 500 finished slightly higher.

According to preliminary calculations, the Dow Jones industrial average ended down 11.66 points, or 0.09 percent, at 12,708.82. The Standard & Poor’s 500 Index rose 0.62 points, or 0.05 percent, to 1,316.00. The Nasdaq Composite Index was off 2.53 points, or 0.09 percent, at 2,784.17.

The major indexes jumped immediately after the opening bell and swooned by midday. They remained lower most until the last two hours, managing to climb back to positive territory.

Developments in the euro zone including the terms of a likely Greek default remained a concern for investors.

Despite the lull, stocks are off to a strong start in 2012. Investors’ biggest fears have slowly faded. Stronger than expected job growth in the U.S. and falling borrowing costs for European governments have helped the S&P 500 index post gains on 11 of 13 trading days.

For the year, the Dow is up about 4 percent, the S&P about 4.5 percent. “In our view, optimistic sentiment and lightly traded volume are the two key technical concerns that have raised an early warning flag and indicate that the trend should soon flatten,” said Ari Wald, equity analyst at Brown Brothers Harriman in New York.

“Looking ahead to the coming weeks to months, we would be watchful for a new bull market high that goes unconfirmed by our indicators, or if volume on declining days begins to outpace volume on advancing days. This would be a signal for a more meaningful correction.

According to Thomson Reuters data, 15 percent of S&P 500 companies have reported earnings, with 59 percent posting results above Wall Street expectations.

While the percentage of fourth-quarter earnings reports that beat estimates has trailed recent quarters, the rate is expected to improve as earnings season picks up steam. This week 117 S&P 500 companies are expected to report earnings.

Pressuring market sentiment, the euro zone crisis was still lurking in the background. Germany and France pushed for a deal between Greece and its private creditors and said they remained dedicated to a new bailout that is needed by March to stave off a default. Euro zone finance ministers could decide later Monday what debt restructuring terms they would accept.

Associated Press and Reuters contributed to this report.

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Source: http://bottomline.msnbc.msn.com/_news/2012/01/23/10218538-sp-ends-day-with-minor-gains-dow-nasdaq-slightly-off

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A homeless person sleeps outside the headquarters building of the Bank of Greece as pedestrians pass by in Athens, on Friday, Jan. 13, 2012. The Greek government held a second day of talks Friday with private bondholders on a crucial debt relief deal, with global banking representatives warning that time for reaching an agreement is running out. (AP Photo/Thanassis Stavrakis)

A homeless person sleeps outside the headquarters building of the Bank of Greece as pedestrians pass by in Athens, on Friday, Jan. 13, 2012. The Greek government held a second day of talks Friday with private bondholders on a crucial debt relief deal, with global banking representatives warning that time for reaching an agreement is running out. (AP Photo/Thanassis Stavrakis)

Italian Premier Mario Monti attends a debate at the lower chamber in Rome, Thursday, Jan. 12, 2012. Monti says he would support a new tax on financial transactions so long as it applies to the European Union as a whole. Speaking after meeting Wednesday with German Chancellor Angela Merkel, Monti indicated his preference for such a tax for the whole 27-nation bloc, rather than just the 17 countries that use the euro as their currency. (AP Photo/Gregorio Borgia)

Greek Prime Minister Lucas Papademos delivers a speech during a Greek-German Chamber of Commerce meeting in Athens, Friday, Jan. 13, 2012. Crucial negotiations between the Greek government and its private creditors on a bond swap deal needed to avoid default appeared close to collapse Friday, with representatives of the bondholders saying they had been “paused for reflection.” (AP Photo/Thanassis Stavrakis)

Greek Finance Minister Evangelos Venizelos leaves the office of Prime Minister Lucas Papademos, after their meeting with Charles Dallara, the head of the Institute of International Finance that represents Greece’s private bondholders in Athens on Friday, Jan 13, 2012.The Greek government held a second day of talks Friday with private bondholders on a crucial debt relief deal, with global banking representatives warning that time for reaching an agreement is running out.(AP Photo/Petros Giannakouris)

PARIS (AP) ? Standard & Poor’s swept the debt-ridden European continent with punishing credit downgrades Friday, stripping France of its coveted AAA status and dropping Italy even lower. Germany retained its top-notch rating, but Portugal’s debt was consigned to junk.

In all, S&P, which took away the United States’ AAA rating last summer, lowered the ratings of nine countries, complicating Europe’s efforts to find a way out of a debt crisis that still threatens to cause worldwide economic harm.

Austria also lost its AAA status, Italy and Spain fell by two notches, and S&P also cut ratings on Malta, Cyprus, Slovakia and Slovenia.

The downgrades on more half of the countries that use the euro could drive up yields on European government debt as investors demand more compensation for holding bonds deemed to be riskier. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens.

“In our view, the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone,” S&P said in a statement.

Stocks fell Friday as downgrade rumors reached the trading floors of Europe and the United States. But the declines were nothing like the wrenching swings of last summer and fall, when the debt crisis threw the markets into turmoil.

The Dow Jones industrial average in New York was down 0.5 percent. Stocks fell 0.6 percent in Germany, 0.5 percent in Britain and 0.1 in France, but each of those markets closed before French Finance Minister Francois Baroin gave first word of the country’s downgrade on French television.

Earlier Friday, the euro hit its lowest level in more than a year and borrowing costs for European nations rose.

Some analysts downplayed the impact of the downgrades.

“It’s going to create bad headlines for a day or two,” said Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics. But “there’s no underlying new information … This will be quickly forgotten.”

Still, the cut in the French credit rating may lead bond traders to raise borrowing costs for the financial rescue fund, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, a financial firm.

“There’s a legitimate reason to be concerned,” he said. “A weaker France means a weaker bailout fund.”

France’s downgrade to AA+ lowers it to the level of U.S. long-term debt, which S&P downgraded last summer. S&P had warned 15 European nations in December that they were at risk for a downgrade.

France is the second-largest contributor behind Germany to Europe’s financial rescue fund. The fund still has a rating of AAA. That means that it can borrow on the bond market at low rates.

Borrowing costs for the French government rose before the announcement. The yield on France’s 10-year government bond rose to 3.1 percent from 3 percent earlier. That is still less than the 3.36 percent rate on the same bond last week and far below the 6.6 percent that Italy has to pay to borrow money from bond investors for 10 years.

Germany, the strongest economy in Europe, pays a yield of just 1.76 percent. The United States 10-year Treasury note paid 1.85 percent Friday, down 0.08 percentage points ? a sign that investors were seeking safety in U.S. debt.

Speaking on France-2 Television, Baroin said the downgrade of France’s AAA sovereign debt rating was not “a catastrophe.” He underscored that France still had a solid rating.

“The United States, the world’s largest economy, was downgraded over the summer,” Baroin said. “You have to be relative, you have keep your cool. It’s necessary not to frighten the French people about it.”

Some affected countries took issue with S&P’s conclusions. Portugal’s Finance Ministry said there were “significant methodological shortcomings” in the agency’s appraisal because it overlooked the bailed-out country’s debt-reduction and economic reform efforts.

European Commission Vice President Olli Rehn called S&P’s actions “inconsistent.” He said countries affected by the euro crisis have taken “decisive action in all fronts of its crisis response” to push reforms and strengthen banks.

Fears of a downgrade brought a sour end to a mildly encouraging week for Europe’s heavily indebted nations and were a stark reminder that the 17-country eurozone’s debt crisis is far from over.

Earlier Friday, Italy had capped a strong week for government debt auctions, seeing its borrowing costs drop for a second day in a row as it successfully raised as much as euro4.75 billion ($6.05 billion).

Spain and Italy completed successful bond auctions on Thursday, and European Central Bank president Mario Draghi noted “tentative signs of stabilization” in the region’s economy.

The downgrades could drive up the cost of European government debt as investors demand more compensation for holding bonds deemed to be riskier than they had been. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens.

In Greece, negotiations Friday to get investors to take a voluntary cut on their Greek bond holdings appeared close to collapse, raising the specter of a potentially disastrous default by the country that kicked off Europe’s financial troubles more than two years ago.

The deal, known as the Private Sector Involvement, aims to reduce Greece’s debt by euro100 billion by swapping private creditors’ bonds with new ones with a lower value, and is a key part of a euro130 billion international bailout. Without it, the country could suffer a catastrophic default that would send shock waves through the global economy.

Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met on Thursday and Friday with representatives of the Institute of International Finance, a global body representing the private bondholders. Finance ministry officials from the eurozone also met in Brussels Thursday night.

At Friday’s Italian auction, investors demanded an interest rate of 4.83 percent to lend Italy three-year money, down from an average rate of 5.62 percent in the previous auction and far lower than the 7.89 percent in November, when the country’s financial crisis was most acute.

While Italy paid a slightly higher rate for bonds maturing in 2018, which were also sold in Friday’s auction, demand was between 1.2 percent and 2.2 percent higher than what was on offer.

The results were not as strong as those of bond auctions the previous day, when Italy raised euro12 billion and demand was strong for a sale of Spanish debt.

“Overall, it underscores that while all the auctions in the eurozone have been battle victories, the war is a long way from being resolved (either way),” said Marc Ostwald, strategist at Monument Securities. “These euro area auctions will continue to present themselves as market risk events for a very protracted period.”

Italy’s euro1.9 trillion in government debt and heavy borrowing needs this year have made it a focal point of the European debt crisis.

Italy has passed austerity measures and is on a structural reform course that Premier Mario Monti claims should bring down Italy’s high bond yields, which he says are no longer warranted.

Analysts have said the successful recent bond auctions were at least in part the work of the ECB, which has inundated banks with cheap loans, giving them ready cash that at least some appear to be using to buy higher-yielding short-term government bonds.

Some 523 banks took euro489 billion in credit for up to three years at a current interest cost of 1 percent.

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Contributing to this report were Associated Press writer Nicole Winfield in Rome, Associated Press writer Gabriele Steinhauser in Brussels and AP Business writers David McHugh in Frankfurt, Paul Wiseman in Washington and Matthew Craft in New York.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/cae69a7523db45408eeb2b3a98c0c9c5/Article_2012-01-14-EU-Europe-Financial-Crisis/id-351a0809236440fca910f755adff9fdd

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DUBAI (AFP) ? Gulf stock markets dropped on Sunday a day after Saudi shares tumbled over five percent as news of the historic US credit downgrading sent jitters through the region’s markets.

Following the Muslim weekend, the Dubai Financial Market Index opened trading down 4.5 percent before clawing back some ground to end the day 3.69 percent weaker at 1,484.31 points.

Shares in property giant Emaar Properties shed 5.26 percent.

In neighbouring Abu Dhabi, the General Index closed down 2.53 percent at 2,603.22 points after opening in red, with banks losing 3.30 percent and real estate shedding 5.61 percent.

The Saudi stock market fell for the second consecutive day after being the first market globally hit by a selloff after international agency Standard & Poor’s cut its credit rating for the United States.

The Tadawul All-Shares Index traded 0.83 percent down at 6,023.18 points after the largest Arab bourse shed 5.46 percent of its value on Saturday.

The Kuwait Stock Exchange closed 1.61 percent at 5,927.8 points, while the Qatar Exchange was still trading down 2.3 percent at 8,295.47 points. The Bahrain Bourse closed 0.33 percent down at 1,276.86.

Oman’s Muscat Securities market closed 2.08 percent down at 6,150.19.

S&P said on Friday it was downgrading the United States’ credit rating to AA+ from the top notch triple-A.

The announcement panicked international markets and was criticised by Washington as unjustified.

But S&P argued US leaders were becoming less able to get to grips with the country’s huge fiscal deficit and debt load.

The agency also gave a negative outlook for the United States, saying there was a chance its rating could be cut again within two years if progress is not made to reduce the government budget gap.

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/afp/20110807/bs_afp/stocksgulfuspoliticseconomy

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