Markets tumble after 'Plan B' collapses

Financial markets tumbled Friday morning — on day after Speaker John Boehner (R-Ohio) was forced to abandon a vote on his backup tax bill.

The Dow Jones Industrial Average dropped 150 points in the first minutes of trading, while the Nasdaq and S&P 500 both tumbled over 1 percent.

If the market continues to decline, it would mark a significant shift in investor outlook over the "fiscal cliff" — the combination of expiring tax cuts and automatic spending cuts set to take effect at the beginning of January that experts warn could drive the nation into a recession.

Financial markets had remained relatively steady amid the ongoing fiscal talks, with investors seemingly confident that the two sides would reach an agreement in time, even as Boehner began pushing for his alternate tax plan and negotiations with the White House ground to a halt. The Dow Jones Industrial Average closed up Thursday roughly 60 points, and the Nasdaq and Standard & Poor's 500 both logged solid gains as well.

But the surprising turn of events Thursday evening, in which Boehner failed to garner sufficient support among his own colleagues for his preferred plan, has thrown fiscal-cliff talks into disarray, and increased concern that the U.S. could go over the cliff come Jan. 1.

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On Thursday evening, Boehner shocked his GOP colleagues by announcing he was abandoning efforts to pass his competing "Plan B" tax bill, which would permanently extend tax rates for all annual income below $1 million. GOP leaders had spent much of the week trying to win over skeptical conservatives on the measure, but appeared to be far short of the votes they needed. 

In a statement after a closed-door conference meeting, Boehner said the responsibility for stoping tax hikes and spending cuts now fell to the White House and the Senate.

“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Boehner said. “Now it is up to the president to work with Sen. Reid on legislation to avert the fiscal cliff."

The White House responded by saying President Obama will work with Congress to "find a bipartisan solution quickly that protects the middle class and our economy."

The downturn is reminiscent of recent bouts of market turmoil brought on by legislative brinksmanship. 

Markets took a steep turn for the worse after Standard & Poor's issued the first-ever downgrade of the nation's credit rating following the debt-limit standoff in August 2011. 

FitchRatings and Moody's Investors Service, the other two major raters, have kept the nation at the top AAA rating, but have warned they will be following fiscal talks closely, and insufficient action to improve the nation's fiscal course could usher in a downgrade.

Markets sent an infamous message to Congress in 2008 after the House failed to initially pass the Troubled Asset Relief Program (TARP). The Dow logged a 777-point loss  its largest one-day drop ever, and helped drive lawmakers to pass the bill just days later.