US STOCKS-Futures drop as Washington stalemate drags on

Reuters

* Debt ceiling deadline draws closer

* Cooper Tire slumps on buyout squabble

* Alcoa, Yum Brands to report after the close

* Futures off: Dow 116 pts, S&P 14 pts, Nasdaq 22.75 pts

By Chuck Mikolajczak

NEW YORK, Oct 7 (Reuters) - U.S. stock index futures fell onMonday as the partial U.S. government shutdown continued withno signs of a softening in the positions of politicians over thedebt-ceiling limit or budget impasse.

Republican House Speaker John Boehner vowed on Sunday not toraise the U.S. debt ceiling without a "serious conversation"about what is driving the debt, while Democrats said it wasirresponsible and reckless to raise the possibility of a U.S.default.

The United States faces a deadline of Oct. 17 to raise its$16.7 trillion debt limit or risk an unprecedented debt default. The two issues of emergency funding for thegovernment to operate and increase the U.S. borrowing authoritystarted out separately in the House but have been merged by thepressure of time.

"Fear is mounting among investors that the upcoming debtceiling deadline will be handled as poorly as the budget impassehas," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

"Given the lack of bipartisan workmanship, confidence is lowand it is manifesting in poor market performance."

The S&P 500 has fallen two straight weeks and is down2 percent from its all-time closing high of 1,725.52 on concernsabout the effect of dysfunction in Washington on the economy.

S&P 500 futures fell 14 points and were below fairvalue, a formula that evaluates pricing by taking into accountinterest rates, dividends and time to expiration on thecontract. Dow Jones industrial average futures lost 116points, and Nasdaq 100 futures dropped 22.75 points.

Apollo Tyres of India and U.S.-based Cooper Tire &Rubber Co disagree over whether Apollo should pay alower price in its $2.5 billion takeover, the latest hurdle in adeal beset by lawsuits, labor issues and unhappy Apolloinvestors. Cooper Tire shares slumped 10.2 percent to $26.50 inpremarket trade.

Private equity firm KKR & Co LP is nearing a deal toacquire lifting equipment company Crosby Group LLC for around $1billion, two people familiar with the matter said on Sunday.

Food waste recycler Darling International Inc saidit would buy Vion Ingredients, a unit of privately held VionHolding NV, for 1.6 billion euros ($2.18 billion).

The third-quarter earnings season gets under way this weekas Alcoa Inc, the largest U.S. aluminum company, and Yum!Brands Inc are scheduled to report.

European stocks dropped in thin volumes, with one benchmarkindex hitting a four-week low as investors fretted over lack ofprogress in Washington's budget standoff.

Asian shares also declined, as Japan's Nikkei share average dropped 1.2 percent, hitting a one-month low andextending last week's 5 percent tumble.

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