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Markets eventually shrug off Spain downgrade, turn positive

UPDATED at 2:30 p.m.:

The markets appear to have eventually shrugged off the Spanish debt downgrade and have turned pretty strongly positive on the day. We'll see how the Fed's dovish statement on interest rates and the recovery released moments ago sends stocks home this afternoon.

As of 2:30 p.m., the Dow is up three-quarters of 1 percent.

The broader S&P 500 is up nearly 1 percent and the tech-heavy Nasdaq has recovered from its daylong funk and is up one-quarter of 1 percent.

Spain downgrade sends markets see-sawing

12:13 p.m.: Spain became the latest European nation to have its debt downgraded, joining Greece and Portugal, a move that caused the stock market to see-saw and give back some of its early gains.

Standard & Poor's cut Spain's debt rating to AA this morning, from AA+. This is not like S&P cutting Greece's bond rating to junk, but it adds gasoline to Europe's increasing debt fire. S&P has also cut Portugal's debt rating. Collectively, the debt-troubled nations of Europe are known as the PIIGS: Portugal, Iceland, Ireland, Greece and Spain.

Wall Street has responded by tempering its earlier gains.

In mid-day trading, the Dow is just above water.

The broader S&P 500 is up one-tenth of 1 percent but the tech-heavy Nasdaq is down by four-tenths of 1 percent.

The European Central Bank and the International Monetary Fund are working with Greece, Germany and other nations to quickly put in place a bailout plan for Greece, hopefully as early as this weekend. The early estimates indicated that it would take $56 billion to help Greece. Now, the it looks like it will take twice as much.

And here's the troubling issue for Greece: If Moody's follows S&P and downgrades Greece to junk, the nation can no longer use its bonds as collateral to borrow money from the ECB. Greece will be out of money, and out of options.

And for those of you who wonder what Greece has to do with us here in the U.S., noting that the U.S. has a tiny direct exposure to the Greek problem, just look at what the stock market did on Tuesday.

This whole debt crisis has thrown the fate of the euro into doubt. The problem with having a supra-national currency is that participating nations still have authority over budgets and taxation but no control over monetary policy. If Greece was still on the Drachma, it could radically adjust its monetary policy to help shock itself out of this debt crisis. Now, its fate is in the hands, mostly, of Germany, Europe's most powerful economy.

Stocks rebound at opening

9:55 a.m.: Stocks have bounced back in early trading this morning, recovering some of the losses incurred in yesterday's sell-off, as trader expect good news from Fed Chairman Ben Bernanke this afternoon and pressure builds on Germany to back a Greek bailout.

In the first 25 minutes of trading, the Dow is up two-tenths of 1 percent.

The broader S&P 500 is up nearly half of 1 percent and the tech-heavy Nasdaq is one-quarter of 1 percent.

Bernanke is expected to sound a confident note on the strength and continuation of the economic recovery in remarks is plans to give this afternoon at the conclusion of the Fed's two-day meeting.

In Europe, the heads of the ECB and the IMF were set to brief German lawmakers about the seriousness of the Greek situation -- and its potential to spread across the Continent -- and encourage them to back a bailout plan for Athens.

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By Frank Ahrens  |  April 28, 2010; 2:30 PM ET
Categories:  The Ticker , Wall Street  | Tags: Ben Bernanke, Business, ECB, European Central Bank, Federal Reserve System, Germany, Greece, Greece and Portugal, Greece debt, International Monetary Fund, Investing, Standard & Poor, Stock market, Wall Street, european debt crisis, greece debt crisis, greek debt, portugal downgrade, spain downgrade  
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Bailout? More like ransom shall be taken in the way. You can keep the prisoners. I know, we'll be made noble by the riches of debt. Throw the Post into a tailspin, run up the debt a few billion and say oh well that was fun. Then call the undertaker and say we need your services, you just won't be getting paid for them. See how far you get! There's a market for dumb ideas and lots of makers. Get a bottle of Makers Mark.

Posted by: tossnokia | April 28, 2010 8:26 PM | Report abuse

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