Democrats block government funding package in Senate as negotiations continue to avert a shutdown

WASHINGTON (AP) — Democrats voted to block legislation to fund the Department of Homeland Security and several other agencies Thursday as they continued to negotiate with Republicans and the White House on new restrictions for President Donald Trump’s surge of immigration enforcement.

Thursday’s 45-55 test vote came as Democrats have threatened a partial government shutdown when money runs out on Friday. But Trump said just ahead of the vote that “we don’t want a shutdown” and the two sides were discussing a possible agreement to separate homeland security funding from the rest of the legislation and fund it for a short time.

As the country reels from the deaths of two protesters at the hands of federal agents in Minneapolis, irate Senate Democrats laid out a list of demands on Wednesday, including that officers take off their masks and identify themselves and obtain warrants for arrest. If those are not met, Democrats say they are prepared to block the wide-ranging spending bill, denying Republicans the votes they need to pass it and triggering a shutdown.

Senate Democratic leader Chuck Schumer of New York has said that Democrats won't provide needed votes until U.S. Immigration and Customs Enforcement is “reined in and overhauled" and that this is “a moment of truth.”

“The American people support law enforcement. They support border security. They do not support ICE terrorizing our streets and killing American citizens,” Schumer said.

Schumer has pushed Republicans and the White House to strip the Homeland Security funding from the rest of the bill, which includes money for the Defense Department and other agencies. In the deal under discussion, Homeland Security would still be funded but for a short time to allow for negotiations on the Democrats' demands. Other agencies included in the bill would be funded through the end of September.

Still, with no agreement and an uncertain path ahead, the standoff threatened to plunge the country into another shutdown just two months after Democrats blocked a spending bill over expiring federal health care subsidies, a dispute that closed the government for 43 days as Republicans refused to negotiate.

That shutdown ended when a small group of moderate Democrats broke away to strike a deal with Republicans, but Democrats are more unified this time after the fatal shootings of Alex Pretti and Renee Good by federal agents.

Senate Majority Leader John Thune, R-S.D., encouraged Democrats and the White House to talk and find agreement.

“We’re getting closer,” the GOP leader said on the Senate floor Thursday morning.

Kicking off a Cabinet meeting, Trump said his administration is speaking with congressional Democrats.

“We’re working on that right now,” Trump said while declining to go into specifics. He added: “We don’t want a shutdown.”

There’s a lot of “unanimity and shared purpose” within the Democratic caucus, Minnesota Sen. Tina Smith said after a lunch meeting Wednesday.

“Boil it all down, what we are talking about is that these lawless ICE agents should be following the same rules that your local police department does," Smith said. "There has to be accountability.”

Earlier Thursday, Tom Homan, the president's border czar, said during a press conference in Minneapolis that federal immigration officials are working on a plan to begin drawing down the number of agents in Minnesota but that it would depend on cooperation from state authorities.

It's unclear how far those assurances will go in satisfying Democrats. Amid the Trump administration’s immigration crackdown, Schumer said Democrats are asking the White House to “end roving patrols” in cities and coordinate with local law enforcement on immigration arrests, including requiring tighter rules for warrants.

Democrats also want an enforceable code of conduct so agents are held accountable when they violate rules. Schumer said agents should be required to have “masks off, body cameras on” and carry proper identification, as is common practice in most law enforcement agencies.

The Democratic caucus is united in those “common sense reforms” and the burden is on Republicans to accept them, Schumer said, as he has pushed for the Homeland Security spending to be separated out to avoid a broader shutdown.

As the two sides negotiated, it was unclear whether they could agree on anything that would satisfy Democrats who want Trump's aggressive crackdown to end.

As the negotiations continued, it was unclear whether all Democrats would agree to a temporary extension of the funding. Vermont Sen. Bernie Sanders, an Independent who caucuses with Democrats, has said that Congress should not send “another penny" to ICE until Homeland Security Secretary Kristi Noem is fired.

And across the Capitol, House Republicans have said they do not want any changes to the bill they passed last week. In a letter to Trump on Tuesday, the conservative House Freedom Caucus wrote that its members stand with the Republican president and ICE.

“The package will not come back through the House without funding for the Department of Homeland Security,” according to the letter.

Just ahead of the Senate vote, Appropriations Committee Chairwoman Susan Collins, R-Maine, called for Democrats to vote to move forward on the bill so they could negotiate the changes ahead of final passage.

“This morning's vote is about taking the first step, not the final step," Collins said.

Several Republican senators have said they would be fine with Democrats’ request to separate the Homeland Security funds for further debate and pass the other bills in the package. But it might be more difficult for Democrats to find broad GOP support for their demands on ICE.

North Carolina Sen. Thom Tillis said he is opposed to the Democrats’ proposal to require the immigration enforcement officers to show their faces, even as he blamed Noem for decisions that he said are “tarnishing” the agency’s reputation.

“You know, there’s a lot of vicious people out there, and they’ll take a picture of your face, and the next thing you know, your children or your wife or your husband are being threatened at home," Tillis said. "And that’s just the reality of the world that we’re in.”

South Carolina Sen. Lindsey Graham posted on X that he was putting his Senate colleagues “on notice” that if Democrats try to make changes, he would insist on new language preventing local governments from resisting the Trump administration’s immigration policies.

Democrats say they won’t back down.

“It is truly a moral moment,” said Sen. Richard Blumenthal, D-Conn. “I think we need to take a stand.”

Associated Press writers Michelle L. Price and Lisa Mascaro in Washington contributed to this report.

Sen. Thom Tillis, R-N.C., speaks with reporters following a closed-door meeting with fellow Republicans on spending legislation that funds the Department of Homeland Security and a swath of other government agencies, at the Capitol in Washington, Wednesday, Jan. 28, 2026. (AP Photo/J. Scott Applewhite)

With a partial government shutdown looming by week's end, Sen. Lisa Murkowski, R-Alaska, a member of the Senate Appropriations Committee, is surrounded by reporters following a closed-door Republican meeting on spending legislation that funds the Department of Homeland Security and a swath of other government agencies as the country reels from the deaths of two people at the hands of federal agents in Minneapolis, at the Capitol in Washington, Wednesday, Jan. 28, 2026. (AP Photo/J. Scott Applewhite)

President Donald Trump speaks during the launch of a program known as Trump Accounts at the Andrew W. Mellon Auditorium, Wednesday, Jan. 28, 2026, in Washington. (AP Photo/Jacquelyn Martin)

Senate Minority Leader Chuck Schumer, D-N.Y., waits to speak to reporters following a closed-door meeting with fellow Democrats at the Capitol in Washington, Wednesday, Jan. 28, 2026. (AP Photo/J. Scott Applewhite)

NEW YORK (AP) — The worst day for Microsoft in years is yanking the U.S. stock market away from its record heights on Thursday. The fever in the gold and metals markets may be breaking, meanwhile, after prices suddenly snapped back following their jaw-dropping runs.

The S&P 500 sank 1% after flirting with its all-time high earlier in the morning. The Dow Jones Industrial Average was down 113 points, or 0.2%, as of noon Eastern time, and the Nasdaq composite was 1.9% lower.

Microsoft was the heaviest weight on the market by far, and it tumbled 12% even though the tech giant reported stronger profit and revenue for the latest quarter than analysts expected. Investors honed in instead on how much Microsoft is spending on investments, whether growth in its Azure cloud business will slow and how long its push into artificial-intelligence technology will take to turn into big profits.

Its stock is on track for its worst day since the market's COVID crash in 2020, and it was alone responsible for more than two-thirds of the S&P 500's drop.

Tesla also weighed on the market after falling 2.3%. It delivered a bigger profit for the latest quarter than analysts expected, but the results were sharply lower than from a year earlier. Tesla’s leader, Elon Musk, has been trying to get investors to focus less on its flagging car sales and more on the company’s robotaxis and robots.

Companies across the market are under pressure to deliver at least solid growth in profits following record-setting runs for their stock prices. Stock prices tend to follow the path of corporate profits over the long term, and earnings need to rise to quiet criticism that stock prices have grown too expensive.

ServiceNow dropped 11.8% even though it reported a stronger profit for the latest quarter than expected. Analysts praised the performance, but it wasn’t enough to stop a slide for the stock that’s been underway since the summer.

Still, more stocks rose in the S&P 500 than fell. Leading them was Meta Platforms. The company behind Facebook, Instagram and WhatsApp rallied 8.6% after topping profit expectations, even though it also said it will continue its massive investments in AI.

IBM was another winner and climbed 6% after surpassing analysts’ expectations for profit and revenue. Southwest Airlines flew 15.4% higher even though its profit fell short of forecasts. It gave a forecast for earnings in 2026 that blew past analysts’ expectations, saying it’s seeing strong momentum after making changes to its business like charging baggage fees and having assigned seating.

Some of the wildest action in financial markets was again for precious metals.

Gold’s price rallied near $5,600 per ounce in the morning before it suddenly and briefly dropped back below $5,200. It was most recently at $5,286.90, down 1% from the prior day.

It was only on Monday that gold's price topped $5,000 for the first time, and it had nearly doubled over the last 12 months.

Silver, which has been zooming higher in its own feverish run, had a similar and sudden reversal of momentum.

Prices for precious metals had been surging as investors looked for safer things to own while weighing a wide range of risks, including a U.S. stock market that critics call expensive, political instability, threats of tariffs and heavy debt loads for governments worldwide.

But safety can come at a price when it's really expensive. The huge run for gold and silver raised criticism that their prices had gone too far, too fast and were due for a pullback. Even bitcoin, which is pitched as a form of “digital gold,” fell sharply. It sank nearly 5% and dropped toward $85,000.

The U.S. dollar has seen its value sink over the last year because of many of the same risks that drove gold's price higher, but the dollar held relatively steady against the British pound, euro and other competitors Thursday.

In the bond market, the yield on the 10-year Treasury dipped to 4.24% from 4.26% late Wednesday.

The Federal Reserve decided Wednesday to at least pause cuts to its main interest rate. That was after the Fed cut rates three times in a row to close out 2025 in an attempt to shore up the job market.

Helping to keep the Fed on pause is the fact that inflation remains stubbornly above the central bank’s 2% target. Lower rates can worsen inflation. They could also further undercut the U.S. dollar’s value, which would help U.S. exporters.

President Donald Trump has been pushing aggressively for lower rates and once again on Thursday criticized the Fed's chair personally for being “too late” to cut.

In stock markets abroad, indexes rose across much of Europe and Asia.

South Korea’s Kospi climbed 1% for one of the world’s bigger moves, lifted to another record in part by chipmaker SK Hynix.

AP Business Writers Yuri Kageyama and Matt Ott contributed.

Trader William Lawrence works on the floor of the New York Stock Exchange, Monday, Jan. 26, 2026. (AP Photo/Richard Drew)

A person walks in front of an electronic stock board showing Shanghai, Nikkei and New York Dow indexes at a securities firm Wednesday, Jan. 28, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)

People stand in front of an electronic stock board showing Japan's Nikkei index at a securities firm Wednesday, Jan. 28, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)

A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Wednesday, Jan. 28, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)

A man stands near an electronic board displaying stock prices and Jakarta Stock Exchange Composite Index, at the Indonesia Stock Exchange in Jakarta, Indonesia, Wednesday, Jan. 28, 2026. (AP Photo/Tatan Syuflana)

A man walks past an electronic board displaying stock prices and Jakarta Stock Exchange Composite Index, at the Indonesia Stock Exchange in Jakarta, Indonesia, Wednesday, Jan. 28, 2026. (AP Photo/Tatan Syuflana)