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May 19, 2023 at 01:59 PM
Debt-limit negotiations hit an impasse Friday as House Speaker Kevin McCarthy blamed the White House for resisting spending cuts, casting doubt on efforts in Washington to avert a catastrophic default.
McCarthy spoke shortly after his hand-picked negotiators abruptly walked out of talks with White House officials, a reversal from the Republican leader’s optimistic view that an deal could be reached as soon as the weekend.
The setback weighed on Wall Street where shares slid on the news.
“We’ve got to get movement by the White House and we don’t have any movement,” McCarthy, who was not in the meeting, said. “So yeah, we’ve got to pause.”
There was not a dramatic flare-up in the room before negotiators left, according to one person familiar with the negotiations. Another person familiar with the talks said it wasn’t a specific issue but ranged broadly across GOP budget-cutting demands.
“Look, they’re just unreasonable,” Republican negotiator Representative Garret Graves said, moments after he walked out of the session. Graves’ comments came a day after McCarthy said he could see a deal coming together with a House vote next week.
Market Impact
McCarthy’s uncharacteristically upbeat comments Thursday on the prospects for an agreement on the U.S. borrowing limit sent stocks upward, with the S&P 500 hitting a nine-month high, closing just shy of 4,200.
Treasury Secretary Janet Yellen has signaled a default could become a risk as soon as June 1.
But news of the breakdown on Friday triggered a slump in stocks, with the S&P 500 at one point losing almost 0.8% from its high of Friday’s session, though the decline moderated later.
The index was down 0.1% as of 12:58 p.m. in New York. Yields on US Treasury bills that mature in early June resumed climbing Friday, showcasing concerns about potential payment-default risks.
