Stocks mostly lower after S&P’s warning to Europe

Stocks edged lower in early trading Tuesday after Standard and Poor’s warned it might downgrade even Europe’s strongest economies.

Overseas markets also sank after the credit rating agency said it is considering downgrades for every nation that uses the euro and isn’t already poorly rated. Traders were surprised by threats to Germany and France, which have Europe’s strongest economies. S&P criticized their handling of the debt crisis.

The Dow Jones industrial average fell 20 points, or 0.2 percent, to 12,077 in the first half-hour of trading. The index was moving between small gains and losses in early trading.

The Standard & Poor’s 500 index fell 4, or 0.3 percent, to 1,253. The Nasdaq composite index fell 5, or 0.2 percent, to 2,650.

The S&P warning left out only two of 17 countries that use the euro: Cyprus, whose bonds have near-junk status, and Greece, whose low ratings already suggest it is likely to default soon anyway. Skepticism over a new plan to prevent a breakup of the common currency also dragged markets lower.

S&P’s announcement halted a rally in European markets. It came just hours after the leaders of Germany and France unveiled a series of proposals, including punishing governments for overspending, that they hope will persuade the European Central Bank or the International Monetary Fund to lend the euro zone more support. Germany’s DAX index fell 1.1 percent, while France’s CAC-40 fell 0.4 percent.

The warning also clipped an advance on Wall Street late Monday. The Dow Jones industrial average finished with a gain of 78 points. It had been up 167 points before reports of the S&P action emerged.

In corporate news:

? Darden Restaurants Inc. slumped 9.2 percent, the most in the S&P 500 index, after the company slashed its profit forecast for 2012. The company is trying to turn around its struggling Olive Garden restaurant chain and cope with rapidly rising food costs.

? Manufacturing conglomerate 3M Co. rose 1 percent, the most of the 30 stocks in the Dow average, after the maker of Post-It notes forecast 2012 earnings that were stronger that many analysts were expecting.