Wall Street stocks dropped on Friday after negotiations to avert a US debt default were suspended, ending a two-session rally.

"We've got to pause," House Republican leader Kevin McCarthy told reporters.

Equities had risen the last two days and pushed higher early on Friday on optimism about the talks.

But stocks went negative as news of the trouble hit, with the Dow Jones ending at 33,426.

The S&P 500 slipped 0.1 percent to 4,191, while the Nasdaq shed 0.2 percent to 12,657.

Briefing.com analyst Patrick O'Hare said the modesty of the losses represents "an expression of the market's underlying belief that something will eventually get done without a default."

Republicans continue to insist Biden must sign up to spending cuts in exchange for their support to raise the debt ceiling, ignoring repeated Democratic calls for a "clean" increase of the borrowing limit with no strings attached.

Regional bank shares were under pressure again, with Comerica, Zions Bancorporation and KeyCorp all losing more than one percent.

Foot Locker plummeted more than 27 percent as it reported a 73 percent drop in quarterly earnings to US$36 million and warned that sales "softened meaningfully given the tough macroeconomic backdrop," forcing "aggressive" markdowns. (AFP)