That left federal budget talks in disarray 10 days before sweeping tax increases and government spending cuts are set to take effect.
The Dow Jones industrial average lost 120 points to close at 13,191 Friday. It had been down as much as 189.
The Standard & Poor's 500 index fell 13 points to 1,430. The Nasdaq composite index fell 29 to 3,021.
The House bill would have raised taxes on Americans making at least $1 million per year and locked in decade-old tax cuts for Americans making less.
Two stocks fell for every one that rose on the New York Stock Exchange. Volume was 4.7 billion shares, higher than the recent average.