US stock futures declined as the government shutdown entered its second day and fears over the debt ceiling escalated.
The government started a partial closure on Tuesday after failing to pass a budget bill by the Monday midnight deadline.
With no talks scheduled between Republicans and Democrats today, the issue looks unlikely to be resolved any time soon.
Some economists predict it could take up to two weeks of political infighting over next year's budget and the debt ceiling.
"In fact, it wouldn't surprise me if neither party was ever really interested in striking a deal over next year's budget, instead seeing it as a dress rehearsal for the debt ceiling negotiations and an opportunity to rally the public against the opposition," said Craig Erlam, Market Analyst at Alpari.
"We never saw any effort to negotiate from either party and neither has made much of an attempt since government shut down at midnight on Monday. This is likely to weigh on risk appetite over the next couple of weeks, with stocks grinding lower until we get a resolution."
The closure of the government is expected to reduce economic growth by 0.3% at most.
However, the debt ceiling is considered to pose a bigger threat to the economy.
The government reached its $16.7trn debt ceiling in May and since then has been using emergency measures to conserve cash.
Treasury will have about $30bn in cash on hand by October 17th, barely enough to pay its bills.
Federal Reserve Chairman Ben Bernanke may shed further light on the shutdown when he speaks later in St. Louis.
The market will be eager to hear whether the shutdown will have an impact on the central bank's decision to begin tapering its monetary stimulus at its meeting in October.
Meanwhile, the US government confirmed today that it will not be issuing data releases, including non-farm payrolls on Friday if the partial shutdown continues.
In the meantime, a report from the ADP Research Institute today showed that companies in the US boosted payrolls by 166,000 in September, up slightly from a 159,000 gain in August but missing estimates for a rise of 180,000.
"With the release of the official payrolls figures delayed until the government shutdown is resolved, this ADP report will take on a much greater significance than normal in the markets," according to Capital Economics.
Alcoa, Global Payments, BP
Alcoa declined after Deutsche Bank reduced its rating to 'sell' from 'hold', saying it expects aluminum prices to fall.
Global Payments rose after the bank-card processor said it expects cash earnings in 2014 will be as much as $4.05 a share, up from a previous estimate of $4.
BP slid after being accused in a US court of delaying the capping of its Macondo well in the 2010 Gulf of Mexico oil spill case.
The US 10-yield yield slipped five basis points to 2.60%.
West Texas Intermediate crude futures rose $0.069 to $102.110 per barrel.