US STOCKS-Wall St falls as U.S. fiscal impasse eludes solution


* Debt ceiling deadline draws closer with no signs ofprogress

* Volatility index rises to highest since June

* BlackBerry shares up on interest from strategic buyers

* Indexes off: Dow 0.6 pct, S&P 500 0.4 pct, Nasdaq 0.6 pct

By Ryan Vlastelica

NEW YORK, Oct 7 (Reuters) - U.S. stocks fell on Monday,extending two weeks of losses, as a lack of progress in endingthe partial U.S. government shutdown or the debt-ceilingstandoff kept investors nervous.

Major indexes came off their morning lows in a volatilesession, but the S&P 500 was on track for its 10th decline inthe past 13 sessions.

The CBOE Volatility index, a measure of investoranxiety, jumped 10 percent to 18.45, its highest since lateJune. The VIX has gained for the past three weeks, and is up 41percent over that period.

The deadline to increase the U.S. borrowing authority orrisk default is Oct. 17, with Congress deadlocked and no end insight.

In weekend comments, neither Republicans nor Democratsoffered any sign of progress and both blamed the other side forthe impasse.

"The market is vulnerable to further declines for as long asthe situation remains unclear. With each passing day, the marketbecomes more restless," said Leo Grohowski, chief investmentofficer at BNY Mellon Wealth Management in New York.

Grohowski, who helps oversee $175 billion in client assets,estimated that each week the shutdown, which began Oct. 1,continues could shave 10 to 15 basis points off gross domesticproduct.

"While that isn't a lot, the recovery is still too fragileto withstand any long-term impact. It will start to have animpact on earnings estimates, which will impact valuations," hesaid.

Nine of the S&P's 10 sectors were lower on the day, withgroups tied to the pace of economic growth, including financials and materials, among the weakest of the day.The only sector that rose was telecom, which isconsidered a defensive play.

Among the biggest losers in the financial sector, CapitalOne Financial lost 2 percent to $68.88 while AmericanExpress Co lost 1.4 percent to $73.28.

The Dow Jones industrial average was down 85.96points, or 0.57 percent, at 14,986.62. The Standard & Poor's 500Index was down 7.38 points, or 0.44 percent, at 1,683.12.The Nasdaq Composite Index was down 21.07 points, or0.55 percent, at 3,786.69.

The S&P has fallen for two weeks and is down nearly 3percent from its all-time high on concerns about Washingtondysfunction.

U.S.-listed shares of BlackBerry rose 4.4 percentto $8.03 after sources close to the matter said it is in talkswith Cisco Systems, Google Inc and SAP about selling all or part of BlackBerry.

Apple Inc rose 1.7 percent to $491.17 afterJefferies & Co upgraded the stock, citing expected marginimprovement.

Atossa Genetics Inc slumped 44 percent to $3 afterthe company said it would recall a medical device used tocollect breast fluid for cancer detection along with a test thatuses it.

With the ongoing stalemate in Washington, trade data onTuesday and retail sales on Friday are among important economicreports that will not be released if the shutdown continues,Wilkinson said. Last week, non-farm payrolls, constructionspending, and factory orders data were not released.

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