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* Government shutdown enters third day, no end in sight
* S&P 500 on track for ninth loss in past 11 sessions
* Jobless claims come in below expectations in latest week
* Indexes down: Dow 0.7 pct, S&P 0.8 pct, Nasdaq 0.6 pct
By Ryan Vlastelica
NEW YORK, Oct 3 (Reuters) - U.S. stocks fell on Thursdayamid lingering market uncertainty as a partial U.S. governmentshutdown continued for a third day and leaders in Congressshowed no sign of progress towards resolving the stalemate.
The situation in Washington has pressured equities, with theS&P 500 having dropped in nine of the past 11 sessions.All 10 S&P sectors fell, with industrial names amongthe hardest hit. Boeing Co fell 1.9 percent to $115.60.
While a short-term government closure is expected to have alimited effect on the U.S. economy, the impact will be greateras the deadlock continues, with market volatility expected tospike. Goldman Sachs estimated on Wednesday a short-termshutdown would slow U.S. economic growth by about 0.2 percentagepoint, while a weeks-long disruption could shave 0.4 percentagepoint off growth, as furloughed workers trim personal spending.
"People thought the shutdown would last one or two days, andnow it appears it could be much longer than that. No one knowswhat to do, and there's a question about whether to startreducing risk now," said Michael O'Rourke, chief marketstrategist at JonesTrading in Greenwich, Connecticut. "We knowthere will be a deal eventually, and you want to be long forwhenever that deal comes."
President Barack Obama met with Republican and Democraticleaders in Congress late Wednesday to try to break the budgetdeadlock that has shut down wide swaths of the government, butthere was no breakthrough and both sides blamed each other.Obama's healthcare law was at the center of the impasse.
Investors are also watching the situation for what it couldmean for the higher-stakes battle over the government'sborrowing power, which is expected to come to a head soon. TheTreasury has said the United States will exhaust its borrowingauthority no later than Oct. 17. If no deal is reached onraising the debt ceiling, the U.S. could default on its debt.
"The debt ceiling and the shutdown have essentially becomeone and the same, as investors need to see both get resolvedsoon," said O'Rourke.
The Dow Jones industrial average was down 111.04points, or 0.73 percent, at 15,022.10. The Standard & Poor's 500Index was down 12.62 points, or 0.75 percent, at1,681.25. The Nasdaq Composite Index was down 22.68points, or 0.59 percent, at 3,792.34.
Despite the recent declines, buyers have come in as the S&Papproached its 50-day moving average of 1,679.88. The movingaverage represents a measure of the near-term trend in themarket and often investors will buy in clusters at such levels.
The CBOE Volatility index, used to measure investoranxiety, rose 5.1 percent. The index has gained more than 33percent over the past two weeks.
Because of the shutdown, up to 1 million Federal employeeswere put on furlough, and the release of government economicdata - including, potentially, Friday's key payroll report - hasbeen delayed. A Federal Reserve official said the impasse coulddelay the central bank's ability to assess whether its monetarystimulus efforts are still needed.
Some data continued to be released, and weekly joblessclaims rose less than expected in the latest week, remaining atpre-recession levels in a signal of growing strength in thelabor market. Growth in the U.S. services sector cooled lastmonth after approaching an eight-year high in August, accordingto the Institute for Supply Management's Septembernon-manufacturing index.
Constellation Brands Inc rose 2.2 percent to $59.56after reporting its second-quarter results and raising itsfull-year outlook.
Tesla Motors Co shares fell 2.4 percent to $176.69after an automotive blog published images of a Model S electricsedan in flames after an accident.
BP Plc won a legal reprieve in its effort to forcethe administrator of a settlement, relating to the 2010 Gulf ofMexico oil spill, to tighten standards in assessing claims,potentially sparing the oil company billions of dollars of extracosts. U.S. shares rose 1.2 percent to $42.61.
