US STOCKS-Wall St rebounds after earlier losses on Yellen hopes

Reuters

* Defensive sectors rebound, including utilities, telecom

* Nasdaq drops as the year's winning tech stocks falter

* Wall St looks past Washington impasse to more gains-poll

* Dow up 0.3 pct, S&P 500 up 0.2 pct, Nasdaq down 0.4 pct

By Julia Edwards

NEW YORK, Oct 9 (Reuters) - U.S. stocks climbed Wednesday torecover some of the day's earlier losses, and the year'shigh-performing technology stocks fell, as investors anticipatedthe nomination of Janet Yellen as U.S. central bank chairman andas a political standoff continued in Washington.

The stalemate in Washington and expectations of Yellen'snomination as Federal Reserve chief made for a volatile marketon Wednesday, leading investors to lock in profit on the year'smajor gainers, many of them technology shares. Facebook was thebiggest drag on the Nasdaq 100, down 2.6 percent to$45.92. The Nasdaq 100 index has had its biggest three-day dropthis week since June 2012.

The broader market was in somewhat better shape, withdefensive sectors such as telecommunications and utilitiesrising on the day.

"With the uncertainty over the government shutdown and theshaving away of the GDP each day, unfortunately, some investorswill start selling these things that were good for the yearrather than pulling off the laggards. And tech has beenperforming very highly," said Michael Matousek, head trader atU.S. Global Investors in San Antonio, Texas.

The CBOE Volatility Index, a measure of investoranxiety, continued to rise, hitting 21.34, before retreating to19.62. A level above 20 is generally associated with increasingconcern about the near-term direction of the market. Trading inVIX options contracts reached a one-day record on Tuesday.

President Barack Obama and Congressional Republicans arelocked in a battle over funding the government and raising thefederal borrowing limit, expected to be surpassed by Oct. 17. The crisis in Washington threatens to damage the credit standing of the United States and to derail the nation's fragileeconomic recovery.

Investors were optimistic about the expected nomination ofYellen as Fed chairman, to be announced Wednesday afternoon.They expect her to tread carefully in winding down the Fed'seconomic stimulus and to provide continuity with the policies ofFed Chairman Ben Bernanke, whose second term is due to expire onJan. 31.

"She is generally seen as more dovish than Bernanke," saidMatousek. "When you clear up the uncertainty of the governmentshutdown and see that she will probably not taper at least untilJanuary of February of 2014, you'll probably see a bid for someof these tech companies again."

A poll by Reuters showed Wall Street strategists expect themarket to rebound toward the end of the year.

The Dow Jones industrial average was up 47.26 points,or 0.32 percent, at 14,823.79. The Standard & Poor's 500 Index was up 3.01 points, or 0.18 percent, at 1,658.46. TheNasdaq Composite Index was down 14.26 points, or 0.39percent, at 3,680.57.

The S&P 500 dropped 1.2 percent on Tuesday, itsworst decline since Aug. 27, sending the benchmark index to itslowest level since Sept. 6 as traders cashed in gains in some ofthe year's highest performing tech stocks.

Men's Wearhouse jumped 29.1 percent to $45.49 afterit rejected smaller rival Jos. A. Bank Clothiers Inc's $2.3 billion takeover offer, saying it significantly undervaluedthe company and could raise antitrust issues. Jos. A. Bankshares rose 7.5 percent to $44.79.

Yum! Brands Inc fell 8.0 percent to $65.58 as boththe worst performer and biggest drag on the S&P 500 after theKFC parent warned it will take longer than expected forrestaurant sales to rebound in China, which accounts for morethan half the company's overall operating profit.

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