The agency downgraded other European countries as well but spared the larger Germany, which still carries a top-notch credit rating.
The Dow Jones Industrial Average closed down 0.39%, while the S&P 500 index was down 0.49% and the Nasdaq Composite index finished off 0.42% on Friday.
While the US won't face too much direct fallout from the move, it will if France, now viewed as a slightly riskier country, encounters difficulties arranging bailout facilities with countries closer to the epicenter of the debt crisis like Greece, according to market watchers.
"This is going to destabilize lot of those funding packages because they are all based on the AAA rating, and now you are going to have AA+ for France and Austria, and maybe down two notches for Italy," said Alan Valdes, director of floor operations for DME Securities in New York, according to Reuters.
Equities prices were lower early on in the session as media reports came in over the downgrade before French officials or Standard & Poor's itself confirmed the move.
Yet stock prices trimmed losses on sentiment that such a move wasn't the end of the world and came as no huge surprise anyway, while the outlook for the US economy remains comparatively strong.
Leading losers included Bank of America, which fell 2.65%, JP Morgan Chase, down 2.52% and Intel, down 2.37%.
Leading gainers included Chevron, up 1.07%, Microsoft, up 0.89%, and DuPont, up 0.62%. European indices, meanwhile, were down as well.
France's CAC 40 fell 0.11%, Germany's DAX fell 0.58%, while Britain's FTSE 100 fell 0.46%.
On Monday, US markets will be closed for the Dr. Martin Luther King, Jr., holiday, although investors will keep an eye on UK consumer confidence figures, Japan's Tertiary Industry Index and Swiss producer price data.
On Tuesday, a German economic sentiment index will publish, as will UK and European inflation data and in the US, the Empire State Manufacturing Index will shed light on general business conditions in New York State.
The Bank of Canada on Tuesday will announce its latest decision on interest rates.
