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Futures Hold Gains, but S&P Dampens Mood

Futures held onto small gains Tuesday as optimism over a possible resolution to the euro zone debt crisis was tempered by a warning from ratings agency S&P’s that it could downgrade the credit ratings of 15 euro member states.

S&P placed the ratings of 15 euro zone countries on credit watch negative—including those of top-rated Germany and France, the region's two biggest economies—and said "systemic stresses" are building up as credit conditions tighten in the 17-nation region. The remaining two members of the euro zone, Portugal and Greece, have already had their credit ratings downgraded to junk.

The warning came after French President Nicolas Sarkozy and German Chancellor Angela Merkel announced they had agreed a plan for a revised European treaty which they plan to put to a summit of European leaders on Friday. The plan would either seek to revise the current Lisbon Treaty, or would lead to an entirely new treaty, and would include sanctions for member states who fail to keep within strict budgetary rules on deficit limits. The plan also calls for the European Stability Mechanism to be brought forward by a year so that it is in place in 2012.

On Wednesday, Sarkozy will meet U.S. Treasury Secretary Timothy Geithner in Pairs, whose fourth trip to Europe since early September reflects U.S. concern about the euro zone.

Geithner visits Germany on Tuesday to meet ECB President Mario Draghi and German officials. Later in the week he joins EU leaders at a political congress in the French city of Marseille due to be dominated by euro crisis talks and then heads to Milan to meet Italian Prime Minister Mario Monti.

Elsewhere, it is a light day in terms of economic reports.

It’s also a light day for earnings news with Autozone among the few companies reporting earnings on Tuesday.

In corporate news Patricia Dunn, the former chair of Hewlett-Packard's board of directors, has passed away at the age of 58. Dunn's tenure was marked by a scandal involving boardroom leaks, which saw her step down from the board in 2006 and a California court dropping charges against her a year later.

Meanwhile, Royal Dutch Shell announced a major discovery of shale gas in China, a market which currently has no commercial shale gas production.

Southwest Airlines CEO Gary Kelly said on Monday that the company's labor costs are too high. The comments were made in a letter to employees and were notable because Southwest has historically enjoyed lower labor costs than its larger competitors.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

On Tap This Week:

WEDNESDAY: Weekly mortgage applications, quarterly services survey, oil inventories, consumer credit
THURSDAY: BoE announcement, ECB announcement, McDonald's sales report, jobless claims, wholesale trade, AT&T CEO speaks; Earnings from Costco, Smithfield Foods
FRIDAY: International trade, consumer sentiment, Greek short selling ban expires, EU summit

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