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Stocks Erase Gains After Greece Downgrade

Stocks erased their earlier gains Monday after Moody's downgraded its debt rating on Greece.

Stocks had been rallying for most of the day, led by techs and industrials, as strong euro-zone industrial data buoyed hopes for the global economic recovery.

The Dow Jones Industrial Average was flat, after being up as much as 100 points earlier.

The S&P 500and Nasdaq were also hovering around the flat line. The CBOE volatility index, widely considered the best gauge of fear in the market, fell to around 28.

Moody's downgraded its debt rating on Greece by four notches, putting it in junk territory.

Peter Boockvar, equity strategist at Miller, Tabak and Co. in New York, called the move by Moody's "well behind the curve."

"The citizens [of Greece] have yet to embrace the idea of scaling back," Todd Schoenberger, managing director of LandColt Trading, explained.

Earlier, stocks rallied following news that showed euro-zone industrial output in April surged year-on-year more than in any month in almost two decades, bolstering the view that economic recovery could be gathering pace.

The euro rose after a burst of short-coveringlifted the single currency above $1.22 and further away from a four-year low.

Oil rose above $75 a barrelamid renewed optimism about the recovery, while goldfell below $1,230 an ounce.

Home Depot shares fell slightly despite Citigroup raising its view on the home improvement retailer. Citi said Home Depot's earnings should improve due to improved expense leverage, share repurchases and higher margins.

BP shares tumbled more than 9 percent following news that the cost to clean up the oil spill in the Gulf of Mexico has spiraled to nearly $1.6 billion and amid worries about the company's dividend.

Halliburton and Transocean were also lower.

BP executives are expected to meet with President Barack Obama on Wednesday. The president is pushing a plan to legally compel the firm to create an escrow accountto compensate businesses and individuals for their losses from the oil spill in the Gulf of Mexico.

Miners were in the spotlight after the US discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials quoted by the New York Times.

Techs continued to ride the wave after National Semiconductor last week beat expectations with its earnings and forecast and S&P raised its credit rating on the company.

SanDisk shares jumped after one analyst suggested the stock could get a boost from rising demand for flash memory.

AT&T rose after the telecom giant said hackers were to blame for the release last week of email addresses for users of Apple's iPad.

A couple of downgrades in the tech sector: Citigroup cut its price target on Google to $630 from $640 and Credit Suisse cut its price target on Qualcomm to $40 from $45.

Still, Schoenberger said he's "very bullish" on the tech sector, saying the upcoming corporate refresh will help boost the sector.

Meanwhile, shares of most airlines rose after Deutsche Bank initiated coverage of the U.S. airline sector with a "favorable view," saying the stocks "benefit disproportionately from an improving economy due to their significant operating leverage."

Coca-Cola shares rose after CFO Gary Fayard said the beverage giant plans to continue to do acquisitions, even as it integrates the North American operations of bottler Coca-Cola Enterprises .

In deal news, Cablevision Systems confirmed its $1.37 billion purchase of Bresnan Communications, an independent operator in the Rocky Mountain region. The fifth-largest cable operator also said it plans a share buyback worth up to $500 million.

And fertilizer maker Mosaic is in talks to buy Mexico's Grupo Fertinal in a deal that could be worth as much as $1 billion, the Wall Street Journal reported.

On the IPO front, the Agricultural Bank of China is seeking to raise more than $23 trillion through a dual Hong Kong and Shanghai listing, putting it on course to be the world's biggest IPO.

This Week:

MONDAY: SEC's Schapiro speaks; Box office futures decision expected
TUESDAY: Fed's Bullard speaks; Empire State survey; import & export prices; credit card default rates expected; E3 video game conf.; Earnings from Best Buy
WEDNESDAY: Weekly mortgage apps; PPI; housing starts; industrial production; weekly oil inventories; Fed's Plosser speaks; Disney insider trader hearing; China trade hearing; Earnings from FedEx
THURSDAY: CPI; weekly jobless claims; current accounts; leading indicators; Philadelphia Fed survey; BP CEO testifies
FRIDAY: Quadruple witching; S&P indexes rebalanced

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