Market Turbulence Deepens As Last-Minute Bid To Avoid Shutdown Fails: S&P 500 Faces Worst Month In 2023

The stock market took a hit on Friday as hard-line conservatives derailed House Speaker Kevin McCarthy‘s last-ditch effort to pass legislation aimed at averting a government shutdown.

The SPDR S&P 500 ETF Trust SPY declined by 0.2%, extending monthly drops to 5%, with September marking the most challenging month for the S&P 500 in 2023.

Chart: The S&P 500’s Most Challenging Month of The Year

Congress Misses Deadline: It is now nearly certain that Congress will fail to meet the Saturday midnight deadline to secure government funding, effectively setting the stage for a shutdown, as the New York Times reported.

The stopgap bill was destined for failure, as several hard-right Republicans steadfastly opposed any temporary spending measure. McCarthy, bracing for potential political backlash, scheduled the vote in an attempt to demonstrate his commitment to averting the crisis.

GOP Chaos: The 232 to 198 vote, with 21 Republicans siding with Democrats, dealt a blow to McCarthy, highlighting GOP turmoil.

This development delays negotiations with President Joe Biden and the Democratic Senate.

The sizable group of defectors reflects both McCarthy’s tenuous grip on his party and the influence of the far-right faction within the House. This division within the GOP makes it easier for Democrats to portray the impending shutdown as a result of Republican chaos.

The plan would have temporarily funded the government for 30 days while imposing substantial cuts across government programs, excluding funding for veterans, homeland security and disaster response. It also proposed the establishment of a deficit commission to explore reductions in Social Security, Medicare and other entitlements. Even if it had passed the House, the measure was deemed dead on arrival in the Democratic-controlled Senate.

House Republicans now face the challenge of regrouping and charting a new course, although their options appear severely limited.

U.S. Rep. Hakeem Jeffries (D-NY) blamed ongoing divisions within the Republican Party as the root cause of the situation. He stressed that the only viable path to break the stalemate is to bring bipartisan legislation, currently awaiting Senate approval, to the House floor. Jeffries also mentioned his plans to engage in a conversation with McCarthy later in the day.

Read now: Ground Control To Congress, Commencing Countdown, Engines Off: How Government Shutdown Could Impact Air Travel

Photo via Shutterstock.