Manchin, a moderate Democrat, appeared to deal a fatal blow to Biden's Build Back Better (BBB) policy bill on Sunday, which aims to expand the social safety net and tackle climate change.
"We had already expected a negative fiscal impulse for 2022 as a result of the fading support from COVID-relief legislation enacted in 2020 and 2021, and without BBB enactment, this fiscal impulse will become somewhat more negative than we had expected," Goldman Sachs analyst Jan Hatzius wrote in a note on Sunday.
Hatzius lowered the U.S. GDP forecast for the first quarter of 2022 to 2 percent from 3 percent, not factoring in that BBB would become a law, cut the second quarter outlook to 3 percent from 3.5 percent, and Q3 forecast to 2.75 percent from 3 percent.
Goldman Sachs says there is still a chance that Congress extends the expanded child tax credit program, which aims at providing free childcare, with some modifications, though "the odds of this occurring are less than even."
The sentiment was jarred by the future of Biden's massive social spending bill after it lost the crucial vote. Dow went down 1.5 percent at 35,365.44 at market close. Futures on the S&P 500 slump 1.3 percent as of 6:01 a.m. Futures on the Nasdaq 100 fell 1.4 percent.