Congressional leaders scrambled for enough votes on Monday to push through an 11th-hour White House-backed deal to raise the U.S. borrowing limit and avert an unprecedented debt default.
Just one day before the deadline to lift the government's borrowing authority, the Democratic-led Senate was expected to pass the $2.1 trillion deficit-cutting plan later on Monday but lingering uncertainty about its fate in the more fractious Republican-controlled House of Representatives rattled financial markets worldwide.
Leaders of both parties worked furiously to sell their rank-and-file on a deal reached with President Barack Obama on Sunday in a bid to end an acrimonious impasse that has undermined America's stature at home and abroad.
Global markets at first showed signs of relief that the United States appeared to be dodging default, but fears that the country might still lose its triple-A credit rating even with a debt deal contributed to a fizzle in a brief stocks rally.
"We avoided the possibility of a default, but now concerns are turning to a possible downgrade," said Phil Streible, senior market strategist with futures broker Lind-Waldock in Chicago.
Votes were expected later in the day in the House of Representatives and Senate on a plan to cut spending over 10 years, form a powerful new congressional committee to recommend a deficit-reduction package by late November, and raise the U.S. borrowing limit through 2013.
U.S. lawmakers split into Democratic and Republicans camps to hear appeals from their party leaders to approve the deal which emerged from feverish negotiations as the clock ticked toward a Tuesday deadline to raise the $14.3 trillion debt ceiling. Party leaders are hoping for sizable majorities in order to give the deal credibility.
If Congress fails to approve the deal by Tuesday, the United States will no longer be able to borrow money to pay all of its bills, a prospect that could have global financial consequences.
It is expected to pass the Senate, but could face a harder path in the House where both conservative Tea Party supporters and liberal lawmakers have expressed dissatisfaction.
House Democratic Leader Nancy Pelosi, a leading liberal, said she was still undecided. "We are very concerned that a bill that makes these big cuts and has not one red cent from the wealthiest people in our country, no revenue, is very disconcerting," Pelosi told reporters.
Raul Grijalva, who heads a group of liberal House Democrats in the House of Representatives, said he expects most members of his progressive caucus to vote against the deal.
Representative Tom Cole, a vote counter for the Republican party, said he expected the Republicans House to pass the plan with a "strong vote."
U.S. stocks rose more than 1 percent at the open on Monday, but quickly fell back in late morning trading, continuing a sag that gathered steam last week. The U.S. dollar rose modestly against the yen and the Swiss franc, a favored safe haven for nervous investors in recent weeks.
Defense and healthcare stocks lagged the overall market because of concerns raised in the deal.
Eric Hugel, an analyst with Stephens Inc, said the U.S. debt deal presents another "large uncertainty" for defense companies, especially because some cuts would be automatic if a 12-member congressional committee cannot agree on further budget savings.