U.S. Markets closed

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

* Debt ceiling deadline draws closer with no signs of progress

* 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 ending the partial U.S. government shutdown or the debt-ceiling standoff kept investors nervous.

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

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

The deadline to increase the U.S. borrowing authority or risk default is Oct. 17, with Congress deadlocked and no end in sight.

In weekend comments, neither Republicans nor Democrats offered any sign of progress and both blamed the other side for the impasse.

"The market is vulnerable to further declines for as long as the situation remains unclear. With each passing day, the market becomes more restless," said Leo Grohowski, chief investment officer 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 domestic product.

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

Nine of the S&P's 10 sectors were lower on the day, with groups 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 is considered a defensive play.

Among the biggest losers in the financial sector, Capital One Financial lost 2 percent to $68.88 while American Express Co lost 1.4 percent to $73.28.

The Dow Jones industrial average was down 85.96 points, or 0.57 percent, at 14,986.62. The Standard & Poor's 500 Index was down 7.38 points, or 0.44 percent, at 1,683.12. The Nasdaq Composite Index was down 21.07 points, or 0.55 percent, at 3,786.69.

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

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

Apple Inc rose 1.7 percent to $491.17 after Jefferies & Co upgraded the stock, citing expected margin improvement.

Atossa Genetics Inc slumped 44 percent to $3 after the company said it would recall a medical device used to collect breast fluid for cancer detection along with a test that uses it.

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