Washington stalemate sinks US stocks; Nasdaq down 2%

In this Monday, Oct. 7, 2013, file photo, specialists Amanda Anderson and Bradley Kessler work on the floor of the New York Stock Exchange. US stocks sank and short-term bond yields jumped Tuesday as the stalemate in Washington over passing a budget and raising the debt ceiling took a deeper toll on financial markets. AP

NEW YORK CITY—US stocks sank and short-term bond yields jumped Tuesday as the stalemate in Washington over passing a budget and raising the debt ceiling took a deeper toll on financial markets.

Investors sold off a wide range of high-flying tech stocks especially as President Barack Obama toughened his line on negotiating with Republicans, saying he would not bow to extortion.

At the closing bell, the Dow Jones Industrial Average fell 158.75 (1.06 percent) to 14,777.49.

The broad-based S&P 500 sank 20.61 (1.23 percent) to 1,655.51, while the tech-rich Nasdaq Composite Index plummeted 75.54 (2.00 percent) to 3,694.83.

Investors also sold off short-term bonds, sending the yield on the one-month Treasury note to 0.31 percent, its highest level since 2008, up from 0.15 percent Monday.

That reflected growing nervousness about the potential for the government to default on some obligations if the debt ceiling is not hiked by Oct. 17.

“Given that there’s nothing but animosity coming from Washington, people are selling off,” said Michael James of Wedbush Securities.