US STOCKS-Wall St falls as no progress seen to resolve shutdown


* 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 0.9 pct, S&P 500 0.9 pct, Nasdaq 1 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.

The S&P 500 ended near its lows of the session in a volatileday and dropped for its 10th time in the past 13 sessions. TheCBOE Volatility index, a measure of investor anxiety,jumped 16 percent to its highest level since June. The VIX hasgained for three weeks, up 48 percent over that period.

Much of the government has been closed since the start ofthe month, resulting in up to a million workers beingfurloughed. Investors are also looking ahead to the upcomingdebate over the debt ceiling, which could result in a default onU.S. debt if not resolved.

In weekend comments, neither Republicans nor Democratsoffered any sign of progress and both blamed the other side forthe impasse. The deadline to increase the ceiling is Oct. 17.

"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 continues could shave 10to 15 basis points off gross domestic product.

"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.

About 70 percent of Nasdaq-listed shares closed lower whilemore than three-fourths of stocks traded on the New York StockExchange ended down.

Among the biggest losers in the financial sector, CapitalOne Financial lost 2 percent to $68.88 while AmericanExpress Co lost 1.8 percent to $72.94.

The Dow Jones industrial average was down 136.34points, or 0.90 percent, at 14,936.24. The Standard & Poor's 500Index was down 14.38 points, or 0.85 percent, at1,676.12. The Nasdaq Composite Index was down 37.38points, or 0.98 percent, at 3,770.38.

The S&P has fallen for two weeks and is down nearly 3percent from its all-time closing high on concerns aboutWashington dysfunction. The benchmark index closed below its50-day moving average, a sign that near-term momentum may be tothe downside.

U.S.-listed shares of BlackBerry rose 3.6 percentto $7.97 after sources close to the matter said it is in talkswith Cisco Systems, Google Inc and Germany'sSAP about selling all or part of the company.

Apple Inc rose 1 percent to $487.75 after Jefferies& Co upgraded the stock, citing expected margin improvement.

Atossa Genetics Inc slumped 46 percent to $2.85after the 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.Last week, non-farm payrolls, construction spending, and factoryorders data were not released.

Volume was light, with about 4.54 billion shares changinghands on the New York Stock Exchange, the Nasdaq and NYSE MKT,below the daily average so far this year of about 6.1 billionshares.

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