The White House has warned that time is running out to reach a compromise on the US debt limit plan, but a spokesman said the administration remains convinced a deal can be reached.
The US government's authority to borrow more money has expired and it risks a default on its debt if Congress and the White House cannot agree a plan by Tuesday.
The sticking point remains how much spending should be cut by, in order to reduce the country's deficit.
White House has warned that time is running out and Republicans and Democrats must come together now on an agreement.
However, spokesman Jay Carney said on Wednesday that the administration firmly believes a deal can be reached.
Earlier, the US administration has warned that President Barack Obama could veto a debt limit plan proposed by top House Republicans.
Meanwhile, Speaker John Boehner's plan to trim public spending and raise the limit met with resistance from rank-and-file members of his own Republican party, the BBC reports.
Mr Boehner's plan would trim $US917 billion from the budget deficit over 10 years and raise the debt limit by up to $US900 billion.
Stocks fall, gold rises
US stocks suffered their worst day in eight weeks, as investors alreay nervous about the faltering debt talks also reacted to lackustre earnings and weak economic data.
The US dollar rebounded following a sell-off this week, partly contributing to a pullback in gold prices, which earlier soared to record highs for the sixth time in two weeks, Reuters reports.
The price of the precious metal is up about 9% in July.
The Dow Jones industrial average closed down 198.75 points (1.59%) at 12,302.55. The Nasdaq Composite Index lost 75.17 points (2.65%) to 2,764.79.
European shares have been hit by persistent fears of contagion in the euro zone debt crisis. The FTSEurofirst 300 ended down 1.1% on Wednesday.
Asian stocks were lower on Thursday.