A Plot to Oust the House Speaker Hits Weary Investors

A House mutiny messes up the markets

Representative Matt Gaetz of Florida moved on Monday to oust Kevin McCarthy as speaker, looking to exact punishment on the top House Republican for siding with Democrats to forge a short-term deal to avert a government shutdown.

The extraordinary power play — just the third time in more than 200 years that such a move has been made against a speaker — risks throwing the House into more turmoil. The shutdown crisis isn’t over, as the deal expires next month. And the repercussions are already being felt in the rocky bond market.

The clash between McCarthy and hard-right Republicans is coming to a head. Gaetz’s move kick-starts a process that could lead to a vote on whether McCarthy can remain in his post. The speaker has two legislative days to address the motion, and he seems to be girding for a fight. “Bring it on,” McCarthy posted on X, formerly known as Twitter, shortly after the motion was filed.

If unable to block the motion, McCarthy would need backing from a majority of the voting House members to stay in power.

McCarthy’s fate may (once again) depend on Democrats. But they have expressed reluctance to extend another lifeline to a political opponent. “I am not a cheap date,” Rep. James McGovern of Massachusetts, the top Democrat on the Rules Committee, told The Times.

The Capitol Hill uncertainty is adding to market volatility. The Dow Jones industrial average fell on Monday, and stock futures were pointing to another weak open on Tuesday. The biggest damage was in the bond market, where the yield on a 10-year Treasury bill topped 4.7 percent this morning, a 16-year high. (Yields rise when prices fall).

Some observers had predicted that a shutdown might bring some relief to bonds. A closed-for-business government, the theory went, would have likely meant that some economic data, like Friday’s jobs report, would not be published. That “would leave the Fed flying blind,” the BMO Capital Markets strategists Ian Lyngen and Ben Jeffery wrote to investors, possibly forcing the central bank to hold off on any planned interest rate increases.

That scenario looks unlikely. Loretta Mester, the Cleveland Fed president, delivered another hawkish call on Monday for the central bank to raise borrowing costs to defeat inflation. Markets seem to be listening: The odds of an interest-rate increase at the December meeting hit nearly 40 percent this morning.

HERE’S WHAT’S HAPPENING

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