* S&P 500 drops under 100-day moving average
* Crude oil jumps on Middle East supply concerns
* Tiffany's falls after results, Goodyear up on labor
* Indexes down: Dow 1 pct, S&P 1.4 pct, Nasdaq 2 pct
By Ryan Vlastelica
NEW YORK, Aug 27 U.S. stocks fell sharply on
Tuesday as geopolitical uncertainty rose over a possible
military strike by the West against Syrian President Bashar
al-Assad's forces after a chemical weapons attack.
The S&P 500 dropped under its 100-day moving average for the
first time since June, a sign of weakening near-term momentum.
The day's decline extended recent weakness that came on
uncertainty over when the U.S. Federal Reserve will start to
slow its stimulative monetary policies.
Odds grew that a strike would occur against al-Assad's
forces for a chemical weapons attack against civilians as a
number of nations and groups-- including Britain, France, Canada
and the Arab League-- joined Washington in urging a firm
response to Assad. Adding to the tension, Russia has supported
Assad in the fighting.
Investors who use asset allocation in their portfolios will
need to adjust to the increased political risk, which could lead
to further market weakness, traders said.
"Geopolitical risk has been muted for asset allocators, but
it needs to be ratcheted up now," said Leo Grohowski, chief
investment officer at BNY Mellon Wealth Management in New York.
"Doing that in a market that was already acting sloppy is cause
for further weakness."
Investor nervousness was reflected in a jump of more than 20
percent in the CBOE volatility index in the last two
days. The uncertainty also lifted gold to a 15-week peak.
Western sources who attended a meeting in Istanbul between
envoys of an alliance opposed to Assad and the Syrian National
Coalition said "action to deter further use of chemical weapons
by the Assad regime could come as early as in the next few
Defense Secretary Chuck Hagel said U.S. military forces in
the region are "ready to go" should President Barack Obama order
action against Syria.
All ten S&P 500 sectors were lower, with financials and
materials the weakest of the day. Both groups, which are closely
tied to the pace of economic growth, fell more than 2 percent.
About 80 percent of companies traded on both the New York Stock
Exchange and Nasdaq fell.
Losses in the energy sector were partly offset as crude oil
surged 2.8 percent.
"The potential disruption of Middle East oil supply will not
only provide support for commodities, but this is a sector that
has underperformed, where valuations are compelling," said
Grohowski, who helps oversee $175 billion in client assets.
The Dow Jones industrial average was down 146.94
points, or 0.98 percent, at 14,799.52. The Standard & Poor's 500
Index was down 23.49 points, or 1.42 percent, at
1,633.29. The Nasdaq Composite Index was down 72.46
points, or 1.98 percent, at 3,585.11.
The S&P 500 is down 2.9 percent in August, putting it on
track for its worst monthly performance since May 2012.
A potential economic headwind for the market is the need to
raise the federal government's borrowing authority soon. U.S.
Treasury Secretary Jack Lew said it was essential for Congress
to raise the borrowing limit by mid-October or the country will
Goldman Sachs fell 2.7 percent to $153.60 a day after
a source said the company lost tens of millions of dollars after
a computer glitch led to a flood of erroneous options trades
Shares of Tiffany & Co's dipped 0.9 percent to
$80.92 after reporting second-quarter sales that missed
expectations, though the jeweler raised its full-year profit
view on strong results in China.
Goodyear Tire and Rubber Co surged 2.2 percent to
$19.05 after the company detailed a new master labor contract.
U.S. regulators have asked Nasdaq OMX Group and
NYSE Euronext to come up with a timeline of Thursday's
three-hour trading disruption, but the rival exchange operators
have been unable to agree on the details, according to several
sources familiar with the situation
Shares of Nasdaq OMX fell 1.9 percent to $30.07 while NYSE
Euronext was off 0.6 percent at $42.06.