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Credit quality of S&P 500 still on the up, notes S&P's.

The credit quality for members of the S&P 500 index has improved since the beginning of 2004, although downgrades continue to outpace upgrades by a decreasing proportion, according to S&Ps, the ratings agency. The downgrade ratio—ratio of downgrades to total rating actions—of S&P 500 index members was 56.8% for the period starting December 31 2003, and ended March 8 2005, marginally ahead of the broader US downgrade ratio of 59.6%.

In 2003, the downgrade ratio for members of the S&P 500 was 74.0%. As of March 8 2005, the distribution of outlooks and CreditWatch listings shows that entities listed with a negative bias still outnumber entities with a positive bias but the distribution has improved since the beginning of 2004.

Entities with either a positive outlook or CreditWatch with positive implications are a good leading indicator of actual upgrades. The proportion of positive listings rose to 12.8% on March 8 2005 from 6.8% on December 31 2003, while the proportion of negative listings fell to 20.0% from 29.2%.

The improvement in credit quality is the result of an expanding economy and very strong corporate profitability. The economy continues to grow at a solid pace, with real GDP up 4.4%

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