New York Report: Shares drop as stalemate in DC lingers on

US STOCKS dropped yesterday 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 US government shutdown, continued with little sign of progress toward a solution.

Stocks trimmed losses following reports that House Speaker John Boehner told colleagues that he would not let the US default on its debt. Boehner’s spokesman said the speaker had always said that the US will not default on its debt.

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 per cent to 42.96 in the third quarter of 2011 as the S&P 500 index fell 14 per cent, the biggest retreat since 2008.

The Dow Jones industrial average was down 136.66 points, or 0.90 per cent, at 14,996.48. The Standard & Poor’s 500 Index was down 15.21 points, or 0.90 per cent, at 1,678.66.

The Nasdaq Composite Index was down 40.68 points, or 1.07 per cent, 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 per cent and down 1.1 per cent, respectively.

Trading volume totalled about 6.1bn shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, figures showed.