* Boehner indicates flexibility on debt limit- NY Times
* S&P 500 ends below 50-day moving average
* Gunfire forces brief lockdown at U.S. Capitol in
* Indexes off: Dow 0.9 pct, S&P 0.9 pct, Nasdaq 1.1 pct
By Angela Moon
NEW YORK, Oct 3 U.S. stocks dropped on Thursday
as investors worried that a budget stalemate in Congress would
become entangled with much more critical legislation to raise
the federal borrowing limit.
The standoff between congressional Democrats and Republicans
to pass an emergency funding bill, which has led to a third day
of a partial U.S. government shutdown, continued with little
sign of progress toward a solution.
Stocks trimmed losses after the New York Times reported that
House Speaker John Boehner told colleagues that he would not let
the United States default on its debt.
Boehner's spokesman said the speaker had always said that
the United States will not default on its debt.
"The fact is that every day we are looming closer and closer
to the debt ceiling issue, which is the real concern," said
Randy Frederick, managing director of active trading and
derivatives at Charles Schwab Corp in Austin, Texas.
"While market losses haven't been too big during shutdowns,
we did retreat about 17 percent in the summer of 2011 just
before raising the debt ceiling."
The CBOE Volatility Index VIX, often used to measure
investor anxiety, jumped as high as 18.71, its highest level
since late June. The VIX rose 160 percent to 42.96 in the third
quarter of 2011 as the S&P 500 index fell 14 percent, the
biggest retreat since 2008.
The Treasury has said the United States will exhaust its
borrowing authority no later than Oct. 17. If no deal is reached
on raising the debt ceiling, the United States could default on
Earlier in the day, President Barack Obama challenged
Republicans to "stop this farce" by allowing a straight vote on
a spending bill.
The Dow Jones industrial average was down 136.66
points, or 0.90 percent, at 14,996.48. The Standard & Poor's 500
Index was down 15.21 points, or 0.90 percent, at
1,678.66. The Nasdaq Composite Index was down 40.68
points, or 1.07 percent, at 3,774.34. The S&P 500's 50-day
moving average stood at 1,679.84.
The S&P 500 has dropped in nine of the past 11
sessions. Among sectors, utilities and industrial
names were among the hardest hit, down 1.2 percent and
down 1.1 percent, respectively.
U.S. stocks briefly extended losses in late afternoon after
shots were fired outside the U.S. Capitol but quickly recovered.
The S&P 500 index closed below its 50-day moving average,
often viewed as a technical level to sell shares.
The Capitol was locked down briefly after the shots were
fired. The House and Senate were in session at the time.
In economic news, the Institute for Supply Management said
its services index fell to 54.4 last month after nearing an
eight-year high in August.
Tesla Motors Co shares fell 4.2 percent to $173.31
after an automotive blog published images of a Model S electric
sedan in flames after an accident.
Dennis Lockhart, president of the Federal Reserve Bank of
Atlanta, said the partial shutdown of the U.S. government will
hurt growth in the last quarter of this year and the Fed's
decision not to taper its bond buying stimulus of the economy
was vindicated by the fiscal impasse.
Trading volume totaled about 6.1 billion shares on the New
York Stock Exchange, the Nasdaq and the NYSE MKT, below the
average daily closing volume of about 6.3 billion this year.
Declining stocks outnumbered advancing stocks by about 4 to
1 on the New York Stock Exchange while on the Nasdaq, decliners
beat advancers by about 3 to 1.