US STOCKS-Wall St's tech-led fall outweighs choice of Yellen for Fed
* Obama to nominate Yellen as Federal Reserve chief
* Nasdaq takes brunt of declines as year's winners falter
* Wall St looking past Washington gridlock at more gains-poll
* Indexes off: Dow 0.4 pct, S&P 0.5 pct, Nasdaq 1.2 pct
By Julia Edwards
NEW YORK, Oct 9 (Reuters) - U.S. stocks fell on Wednesday, with the Nasdaq composite index down 1 percent, as investors sold the year's biggest winning shares, including major tech companies.
The Nasdaq 100 index's drop was the biggest three-day fall since June 2012.
With the political standoff over the budget and debt-limit dragging on, the market derived little solace from the expected nomination of Janet Yellen as the next head of the U.S. Federal Reserve.
The recent weakness in technology shares, particularly social media stocks and others that have led the market throughout 2013, continued.
On Wednesday, Amazon.com and Facebook were the biggest drags on the Nasdaq 100. Netflix was down 4.7 percent to $288.36. This index has lost 4 percent since its close on October 2.
The CBOE Volatility Index, a measure of investor anxiety, continued to rise, hitting 21.12, highest since June. A level above 20 is generally associated with increasing concern about the near-term direction of the market.
Yum! Brands Inc fell 8.4 percent to $65.30 as both the worst performer and biggest drag on the S&P 500 after the KFC parent warned it will take longer than expected for restaurant sales to rebound in China, which accounts for more than half the company's overall operating profit.
The Dow Jones industrial average fell 51.32 points or 0.35 percent, to 14,725.21, the S&P 500 lost 8.32 points or 0.5 percent, to 1,647.13 and the Nasdaq Composite dropped 43.596 points or 1.18 percent, to 3,651.238.
U.S. President Barack Obama will nominate Yellen, currently the No. 2 at the Fed, on Wednesday at the White House at 3 p.m. (1900 GMT), a White House official said.
Investors expect her to tread carefully in winding down the Fed's economic stimulus and provide continuity with the policies of Fed Chairman Ben Bernanke, whose second term is due to expire on Jan. 31.
The S&P 500 dropped 1.2 percent on Tuesday, its worst decline since Aug. 27, sending the benchmark index to its lowest level since Sept. 6 as traders cashed in gains in some of the year's highest performing tech stocks.
The expected nomination of Yellen and the fiscal crisis may eclipse surprising corporate earning reports, many of which are due out next week, noted Adrian Cronje, chief investment officer at Balentine, an investment firm in Atlanta, Georgia that holds $1.6 billion in assets under management.
"It is really important not to become too distracted by Yellen and the Washington stalemate," said Cronje. "Keep one eye on what is unfolding at the onset of corporate earnings season because if the earnings do not meet expectations, you could find the market becoming vulnerable very quickly."
A poll by Reuters showed Wall Street strategists expect the market to rebound toward the end of the year.
According to Thomson Reuters data, third-quarter earnings are expected to grow 4.3 percent and revenue 3 percent.
In Washington, Obama said he would not hold talks on ways to end the fiscal impasse while under threat from conservative Republicans but agreed to discuss anything, including Obamacare, if opponents restore government funding and raise the debt limit.
The crisis in Washington threatens to damage the credit standing of the United States and to derail the recovery.
Men's Wearhouse rose 27.9 percent to $45.07 after it rejected smaller rival Jos. A. Bank Clothiers Inc's $2.3 billion takeover offer, saying it significantly undervalued the company and could raise antitrust issues. Jos. A. Bank shares rose 7.7 percent to $46.34.
Ariad Pharmaceuticals Inc shares plunged 71.7 percent to $4.86 after the company said the U.S. Food and Drug Administration had placed a partial hold on patient enrollment for trials of its cancer drug Iclusig.
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