US STOCKS-Tech stocks slammed, volatility spikes on U.S. stalemate

Reuters

* Profit-taking hits 2013's winners, including Facebook,TripAdvisor

* Lack of progress in Washington boosts volatility

* Alcoa, Yum Brands report after close of trading

* Indexes down: Dow 0.6 pct, S&P 0.8 pct, Nasdaq 1.7 pct

By Julia Edwards

NEW YORK, Oct 8 (Reuters) - U.S. stocks fell on Tuesday, ledby tech stocks that have made some of the biggest gains thisyear, as the lack of progress in ending the fiscal crisis inWashington prompted more selling.

As the partial U.S. government shutdown continued for asecond week and with only nine days left for Congress to raisethe U.S. debt borrowing limit, equity markets that have takenthe political battle in stride showed growing concern.

The technology sector was the biggest loser on the S&P 500,with investors targeting stocks that have outperformedthroughout the year and even held up well as the broader markethas come under modest pressure in the last couple of weeks.

Facebook was the biggest drag on the Nasdaq 100, down5.9 percent to $47.50. Shares of TripAdvisor lost 5.7percent to $71.51 a share, and Netflix fell 4.9 percentto $302.30. Both TripAdvisor and Netflix are among the topperformers this year on the S&P 500, and Facebook is among thetop performers on the Nasdaq 100.

"All of the sudden, you've got these question marks comingin from earnings reports and the government shutdown and you'vegot these portfolio managers saying, 'What is left here for meto keep my neck out? Why not take some profit?'" said DanielMorgan, senior portfolio manager at Synovus Trust Company inAtlanta.

The CBOE Volatility Index, a measure of investoranxiety, rose to 20.17, the highest since June 24 and well aboveits 14-day moving average of 15.79. A level above 20 isgenerally associated with increasing concern about the near-termdirection of the market.

House Republican leaders announced a proposal to establish a20-member bipartisan deficit-reduction committee that would betasked with finding a budget solution to end the governmentshutdown

The longer the government shutdown continues, the greaterthe damage to the economy, according to analysts, increasing theprobability the Federal Reserve will leave its stimulus measuresin place.

President Barack Obama refused House Speaker John Boehner'spublic request for a meeting to negotiate the terms of endingthe partial government shutdown and raising the debt ceiling.

The Dow Jones industrial average was down 87.66points, or 0.59 percent, at 14,848.58. The Standard & Poor's 500Index was down 12.86 points, or 0.77 percent, at1,663.26. The Nasdaq Composite Index was down 62.52points, or 1.66 percent, at 3,707.85.

After Tuesday's market close, former Dow component Alcoa Inc will report earnings, as will KFC parent company Yum!Brands Inc.

McKesson Corp rose 3.7 percent to $134.44 as a top performer on the S&P 500 after Dow Jones Newswires reported thecompany was in advanced talks to take over Celesio ina possible $5.08 billion deal.

J.C. Penney Co Inc rose 3.1 percent to $7.95 afterthe struggling retailer reported a smaller decline in same-storesales for September compared with August and said it was seeingpositive signs in many areas of its business.

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