Euro economic problem hike money market Stocks dropped on Friday, snapping a four-day winning streak, after news reports that Standard & Poor's would downgrade credit ratings on several euro-zone countries.
The ratings agency was reportedly set to downgrade euro-zone countries, including France and Austria, but leave the ratings of Germany and the Netherlands unchanged. French Finance Minister Francois Baroin said the country has been notified of a one-notch cut.
"This is going to destabilize a lot of those funding packages because they are all based on the AAA rating, and now you are going to have AA+ for France and Austria, and maybe down two notches for Italy," said Alan Valdes, director of floor operations for DME Securities in New York.
Friday's slide came as investors' focus shifted back to the euro zone's debt crisis.
In recent days, the S&P 500 had reached five-month highs on the back of solid U.S. economic data. The tight relationship between U.S. stocks and the euro has broken down in recent weeks, a sign investors have placed less emphasis on the euro zone's woes.
The Friday selloff shows Europe's debt problems can still make U.S. investors skittish. However, it is notable that the major U.S. stock indexes finished well off the day's lows.
"If you get a weak recession or deep recession in Europe, it is going to hurt our companies and bring our market right back down," Valdes said.
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