The task of picking up the pieces of the "fiscal cliff" talks - and reassuring global markets that were shaky early Friday - is likely to fall largely to President Barack Obama after the rebuke Thursday to his chief Republican negotiating partner, House Speaker John Boehner.
Boehner could not muster enough support from his fellow Republicans, a majority in the U.S. House of Representatives, to pass his bill called "Plan B" that he had hoped to use to pressure Obama in talks to avert the steep tax hikes and spending cuts slated to start taking effect in just eleven days.
Boehner abruptly pulled the measure that would have raised taxes only on those earning $1 million or more. House members, heading to their districts for the holidays, were instructed to be available on 48 hours notice if necessary.
With his power apparently weakened, Boehner scheduled a news conference for 10 a.m. (1500 GMT) Friday.
Global stock markets weakened on Friday and both the euro and gold slipped as the new setback rattled investors' nerves. Most major stock markets saw widespread selling as investors moved to traditional safe-haven assets.
Democrats, the minority in the House, are now stepping up efforts to gather some Republican votes for a Democratic bill passed by the Senate months ago which would extend the expiring tax cuts to all but the wealthy.
"What we'll have to do is figure out where that line is that gives us those 218 votes" needed to garner a majority of the House behind legislation, Democratic Representative Michael Burgess said on CNBC on Friday.
"I believe we can and must take action before the end of the year to prevent the fiscal cliff," Steny Hoyer, the second ranking Democrat in the House, said in an MSNBC interview. "Democrats are ready to work with Republicans to do so."
Senate Minority Leader Mitch McConnell, who has experience helping to forge deals when House Republicans are in disarray, is likely to play a larger role now in attempting to rescue the situation along with other Senate Republicans, who have been more receptive to compromising.
Sean West, a Eurasia Group analyst, said, "Boehner didn't have a ton of good moves, and has even fewer now." He said he thought Boehner was "either headed back to the White House for a big deal or he's accepting whatever bipartisan fallback is crafted by Senate leaders. Hard to see him coming back with another partisan gambit."