A French newspaper reported today that Standard & Poor’s is downgrading the credit ratings of five euro nations. Italy, Spain and Portugal will be downgraded by two notches while France and Austria will take a one notch hit. The newspaper, Les Echos, also noted that Germany, the Netherlands, Finland and Luxembourg were spared by S&P’s latest downgrade spree.

Les Echos cited no sources but one euro zone source told Reuters, “remain alert tonight when U.S. markets close.”

These rating downgrades should not be that big of a surprise as Standard & Poor’s put 15 euro zone countires on credit watch negative back in December. S&P at the time cited “systemic stresses” were building up in the 17-nation bloc.

It will be interesting to see if other credit ratings agencies such as Fitch and Moody’s will follow suit. This could definitely affect the markets in the near term as it seems like the Europe problem will never go away.

Banking stocks have also taken a hit today on news that JP Morgan Chase & Co. (NYSE:JPM) profits fell 23% last quarter. JPM is trading down nearly 4% right now at $35.41 on heavy volume with 40.5 million shares traded. Other stocks in the sector were also hit hard with Bank of America Corporation (NYSE:BAC) losing 3.09% at $6.58, Citigroup Inc. (NYSE:C) down 3.73% at $30.42 and Morgan Stanley (NYSE:MS) down 3.03% at $16.65.

The other big banks are set to announce earnings next week with Citigroup reporting on Tuesday, Goldman Sachs (NYSE:GS) reporting on Wednesday and Bank of America and Morgan Stanley reporting on Thursday.

As of 1:30 pm EST, the major indices are all down about 1%, but are off their lows. The Dow is down 124.50 points, the Nasdaq is off 26.16 points and the S&P has fallen 14 points.