This story has been updated.
NEW YORK -- With just over a week left before the federal government is set to exhaust its borrowing authority, financial markets are on edge.
U.S. stock market futures shuddered Monday, and Asian and European stocks dropped, as federal policymakers still had not come to an agreement to raise the nation's debt ceiling and avoid default. Investors shunned risky assets and moved money toward safety. The tremors, though relatively muted for now, suggest that anxiety about the ongoing stalemate in Washington has crept into markets worldwide, dampening economic prospects as the reliability of the world's most rock-solid credit has been called into doubt.
"There's a lot of disappointment that there doesn't seem to be a process," said John Silvia, chief economist at Wells Fargo, in an interview before the U.S. stock market opened Monday. "We have enough plans. All we really need is people to come to some kind of an agreement on what's going to get done."
White House Chief of Staff Bill Daley said Sunday on CBS that markets may experience "a few stressful days" in the absence of a debt ceiling deal. That prediction seems to be coming true.
Before the New York stock market open, futures for the Standard & Poor's 500 Index dropped 0.8 percent, and futures for the Dow Jones Industrial Average were down by almost the same amount, according to reports from Bloomberg News and Reuters. The slump in U.S. stock futures that trade elsewhere in the world points to a rough market opening in this country.
(UPDATE: 9:55 a.m. -- Stocks fell Monday morning in New York, with the S&P 500 dropping nearly 1 percent before paring losses, to settle around 0.8 percent below Friday's close. The Dow was down 0.9 percent.)
(UPDATE: 11:47 a.m. -- Stocks continued to pare losses, with the S&P down 0.35 percent below Friday's close, and the Dow down 0.44 percent.)
Major stock indices around the world felt strain. The Stoxx Europe 600 Index dropped 0.4 percent, biting into a four-day run of gains, and in Japan, the Nikkei 225 Stock Average fell 0.8 percent, down from a recent high, Bloomberg reports.
Yields on 10-year U.S. Treasury notes increased slightly, reflecting increased nervousness about the nation's debt. The 30-year rate rose to a nearly two-week high, Bloomberg reports. Treasury rates are still low enough, though, to suggest that investors see default as a remote possibility.
Gold, which investors treat as a safe haven, rallied.
"In stock markets, this crisis is giving investors a buying opportunity," said David Kotok, chairman and chief investment officer of Cumberland Advisors, in a newsletter Monday morning. He also expressed frustration with the state of negotiations in Washington, saying, "the single best insurance we have is the wrath of the American citizen."
The government risks defaulting on its loans if Congress does not increase the debt limit by August 2, the Treasury has said. With Republicans insisting that large spending cuts must accompany a debt ceiling increase, lawmakers have been locked in contentious debates over how much to cut, and whether tax revenue increases will also be part of the deal. Talks fell apart Friday evening, and showed little progress over the weekend.
With the prospect of a U.S. default now a real possibility, major credit rating agencies have called into question the reliability of the nation's debt, which investors consider the safest asset in the world.
Moody's Investors Service and Standard & Poor's have both placed U.S. debt on review for a possible downgrade. S&P said last week that there's a 50 percent chance it will cut the nation's top rating within the next three months.
The rating agency also said that it's not just the debt ceiling issue that has put the Treasury rating at risk: If lawmakers don't strike a deal to reduce the long-term deficit, the government's rating could be docked, S&P said.
Silvia, of Wells Fargo, emphasized this point.
"The challenge," he said, "is not only having an agreement, but having an agreement that looks credible."
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.