US STOCKS-Wall St down as Senate, Obama reject House debt fix


* House Republicans divided over solution to fiscal impasse

* Citigroup profit hit by bond trading slowdown, but sharesrebound

* Volume reduced as investors watch fiscal negotiations

* Indexes off: Dow 0.3 pct; S&P 0.2 pct; Nasdaq 0.2 pct

By Julia Edwards

NEW YORK, Oct 15 (Reuters) - U.S. stocks were down onTuesday in light trading as prospects for an agreement to endthe U.S. government's fiscal impasse shifted from bright to dimduring the day.

Policymakers in Washington have until Thursday to agree toextend the $16.7 trillion U.S. borrowing limit or the countrywill risk a debt default. The White House and Senate rejectedthe House's latest offer.

The uncertainty over how and when a deal will be reachedkept investors from making big bets. Total U.S. market volumewas 3.2 billion shares, lower than average.

"The expectation is that stocks will sink a little lower asthe House takes more and more time to figure things out," saidJohn Brady, managing director at R.J. O'Brien & Associates inChicago.

Washington's stalemate distracted investors from thebeginning of a busy week of earnings. Citigroup reportedweaker-than-expected results as the bank was hit by adouble-digit drop in bond trading revenue for the quarter.Shares fell, then recovered to trade up 0.1 percent at $49.65.

Markets have rallied in the past several days as optimismgrew that lawmakers would agree to end the partial governmentshutdown and eliminate the risk of a U.S. default by approvingmore borrowing authority.

The White House and Democratic leaders in the Senaterejected a proposal on Tuesday from House Republican leadersthat would temporarily open the government and extend borrowingauthority by adding new requirements to President Barack Obama'shealthcare law. Republican leaders also failed to get supportfor the plan from rank and file members within their party.

"The back-and-forth between the Senate and the House iscausing a little bit of nervousness," said Anthony Chan, chiefeconomist at J.P. Morgan Private Client Services.

"Historically, after these things resolve, the markets dorally. And the fact that the markets are still cautious nowmeans that it is preventing investors from taking a strongposition in any direction."

All ten S&P sectors were down except energy, whichwas up slightly at 0.1 percent.

The Dow Jones industrial average was down 45.37points, or 0.30 percent, at 15,255.89. The Standard & Poor's 500Index was down 3.84 points, or 0.22 percent, at 1,706.30.The Nasdaq Composite Index was down 6.21 points, or 0.16percent, at 3,809.07.

Fedex, the world's No. 2 packaging company, said it hasauthorized a share repurchase program of up to 32 million of itsoutstanding shares of common stock. Fedex shares were up 4.7percent to $120.71.

Shares of Teradata Corp fell 16.8 percent to $43.77,a day after the data analytics firm cut its full-year earningsforecast by about 10 percent.

Several other S&P 500 index components report results,including Yahoo Inc and Intel Corp after theclosing bell.

Johnson & Johnson reported stronger-than-expectedquarterly results on strong growth for its prescription drugs.The stock was up 0.5 percent at $90.27.

Coca-Cola Co reported higher earnings and lowerrevenue, helped by strong global sales of its Coca-Cola brandproducts. The shares were up 0.03 percent at $37.92.

Data showed the pace of growth in New York state'smanufacturing sector slipped this month to its slowest sinceMay, but business optimism stayed strong.

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