* Profit-taking hits crowd favorites Facebook, LinkedIn,
* Volatility jumps on lack of progress in Washington
* Alcoa shares rise after the bell, following results
* Indexes down: Dow 1.1 pct, S&P 1.2 pct, Nasdaq 2 pct
By Rodrigo Campos
NEW YORK, Oct 8 U.S. stocks slid on Tuesday as
traders cashed in gains in some of the year's best performers
amid little progress to end a political crisis in Washington
that could affect the U.S. fiscal standing and economic
A gauge of Wall Street anxiety hit its highest level in more
than three months as equity markets showed growing concern over
a partial U.S. government shutdown and with only nine days left
for Congress to raise the U.S. debt borrowing limit.
Facebook was among the biggest drags on the Nasdaq
100, down 6.7 percent to $47.14 on its worst day in more than a
year. Shares of LinkedIn lost 6.1 percent to $222.73,
and Netflix fell 5 percent to $302.32. Netflix is the
top performer this year on the S&P 500, and Facebook is among
the top performers on the Nasdaq 100.
"With the uncertainty surrounding Washington dominating
trading, today was the day the momentum names finally were hit
hard," said Ryan Detrick, senior technical strategist at
Schaeffer's Investment Research in Cincinnati, Ohio.
"Could we finally see a move to the safer blue chips? If the
Washington drama continues, that could be the play."
President Barack Obama turned up the political pressure on
Republicans on Tuesday, saying he would be willing to negotiate
on budget issues only after they agree to re-open the federal
government and raise the debt limit with no conditions.
The possibility the government could default on its debt
raised fears of potential global economic catastrophe, with
foreign creditors and the International Monetary Fund's chief
economist warning of the potential consequences.
"I think what could be said is if there was a problem
lifting the debt ceiling, it could well be that what is now a
recovery would turn into a recession or even worse," IMF chief
economist Olivier Blanchard said. He added, however, such an
event did not appear likely.
The Dow Jones industrial average fell 159.71 points
or 1.07 percent, to 14,776.53, the S&P 500 lost 20.67
points or 1.23 percent, to 1,655.45 and the Nasdaq Composite
dropped 75.544 points or 2 percent, to 3,694.833.
The S&P is down 4 percent from its record closing high three
The CBOE Volatility Index, a measure of investor
anxiety, rose nearly 5 percent to close at its highest since
June 20 as investors are now willing to pay more for protection
against a sudden drop on the S&P 500.
The VIX, up 21.5 percent in the past two days, shot up 27
percent in the last week of 2012 partly on the political
stalemate surrounding the 'fiscal cliff' negotiations, before
falling 39 percent the first week of this year after a deal was
reached in Washington.
On both the NYSE and Nasdaq, more than four issues fell for
every one that rose.
McKesson Corp rose 3.2 percent to $133.72 after Dow
Jones Newswires reported the company was in advanced talks to
take over European drug distributor Celesio in a
possible $5.1 billion deal.
Xerox Corp shares fell 2.5 percent to $10.14 after
it said the U.S. Securities and Exchange Commission was
investigating some accounting practices at Affiliated Computer
Services, an IT outsourcing firm it bought in 2010.
After the closing bell, Alcoa shares rose 1.6 percent
to $8.07 after the aluminum producer reported a third quarter
profit. Shares of Yum Brands Inc, parent
of KFC, were down 6.6 percent to $66.95 after the bell following
results and lowered guidance.