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Speaker of the House John Boehner, R-Ohio, with House Majority Whip Kevin McCarthy, R-Calif., right, walks to a meeting of House Republicans at the Capitol in Washington, Tuesday, Oct. 15, 2013, as a partial government shutdown enters its third week.J. Scott Applewhite/The Associated Press

Optimism turned to confusion on Capitol Hill as House Speaker John Boehner struggled to rally enough votes in his Republican caucus to pass a bipartisan Senate proposal that would end Washington's two-week-old budget impasse.

Stock markets in New York stumbled as House Republicans appeared less willing to compromise than their brethren in the Senate. For the second week in a row, a credit-rating agency said it was reviewing whether the U.S. still deserves its triple-A rating.

Politico reported that Mr. Boehner was planning to hold a vote late Tuesday on legislation that would end the federal government shutdown and raise the statutory debt ceiling – but with conditions that Democratic leaders in Congress and the White House insisted they would oppose.

"The President isn't going to pay ransom to the Tea Party for the American people in order to reopen the government," White House spokesman Jay Carney told reporters Tuesday.

Mr. Boehner wavered most of Monday. He presented the Senate compromise at an early morning meeting with his caucus and the hardliners in the Tea Party faction balked. Mr. Boehner's legislation hews to the new fiscal deadlines agreed by senators, but adds conditions favoured by the few dozen House Republicans that identify with the Tea Party.

The bill would forbid the Treasury Department from using accounting manoeuvres to stay under the debt ceiling. It also would deny subsidies in President Barack Obama's 2010 health law to senior Washington officials and their staffs.

"If they go on the path they are on, they will need 100 per cent of Republican votes," said Nancy Pelosi, the Californian who leads the Democratic minority in the House. Ms. Pelosi accused Mr. Boehner of "sabotaging" the Senate effort to end the budget standoff.

The Standard & Poor's 500 Index, the broadest measure of U.S. stock prices, dropped about 0.7 per cent Monday, and the Dow Jones industrial average lost about 0.9 per cent. The declines were the first since Thursday, when Mr. Boehner stopped changes to Obamacare as a condition of his co-operation on extending the government's spending authority and raising the debt ceiling.

Talks between Mr. Boehner and Mr. Obama chilled ahead of the weekend, but Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell took over negotiations. Both men assured the public Monday that discussions were going well and that a deal was close. Yet they still hadn't released a completed version Tuesday. Reports said they were waiting on Mr. Boehner to decide on his next move.

Underlying concern on Wall Street, Fitch Ratings, one of the three big firms that scores countries' creditworthiness, said after markets closed Tuesday that it was reconsidering whether the U.S. deserves the company's highest score.

"The U.S. authorities have not raised the federal debt ceiling in a timely manner," Fitch said in a statement. "Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinksmanship and reduced financial flexibility could increase the risk of a U.S. default."

Toronto-based Dominion Bond Rating Service, the fourth biggest rating agency by market share, launched a similar review last week.

Politicians failed to extend the federal government's spending authority at the beginning of the month, triggering the cessation of all non-essential services. More crucial is the imminent end of the Treasury Department's borrowing authority, which the Treasury estimates will lapse on Thursday. That introduces the previously unimaginable risk that the world's largest economy could default on its debt.

The agreement that senators are working on would reopen the government until the middle of January, lift the debt ceiling until early February and commit lawmakers to draw up a broader budget by the middle of December. A final deal was delayed by negotiations over some relatively minor conditions that nonetheless could be symbolic wins for both sides.

Mr. Boehner's legislation also would increase the borrowing limit to February, but limit the extension of temporary spending authority to December. That could irritate Democratic leaders, who have opposed setting up the possibility of further brinksmanship during the Christmas shopping season.

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