As of an hour ago, Jay Carney had confirmed for the White House press corps that Obama would agree to a short-term hike even if the GOP didn’t end the shutdown and NRO was reporting that more than 150 House Republicans seemed onboard with Paul Ryan’s strategy. The government had taken its first tentative step towards resolving the fiscal standoff; the Dow closed up 300 points on the day because of the news. All was right with the financial world — so much so that this was the front page of CNN.com at around 6:15 p.m. ET, before the latest news broke:

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“Happiness”! Light at the end of the tunnel! Like Christmas and V-J Day rolled into one!

And then came the groin punch. A silver lining via lefty Benjy Sarlin: At least he waited until the market was closed to deliver it.

President Obama on Thursday rejected a proposal from politically besieged House Republican leaders to extend the nation’s borrowing authority for six weeks because it would not also reopen the government. Yet both parties saw it as the first break in Republicans’ brinkmanship and a step toward a fiscal truce.

Twenty Republicans, led by Speaker John A. Boehner, went to the White House at Mr. Obama’s invitation after a day of fine-tuning their offer to increase the Treasury Department’s authority to borrow money to pay existing obligations through Nov. 22. In exchange, they sought the president’s commitment to negotiate a deal for long-term deficit reduction and a tax overhaul

The Republican proposal could come to a vote as soon as Friday. But the White House and Congressional Democrats remained skeptical that House Republican leaders could pass the proposal. A large faction of Tea Party conservatives campaigned on promises never to vote to increase the nation’s debt limit, and say they do not believe the warnings — including from Republican business allies — that failing to act could provoke a default and economic chaos globally. And House Democrats vowed not to support the proposal without a companion measure to fully fund a government now shuttered for 10 days…

Many Republicans said they would support their leadership’s proposal only if Mr. Obama agreed to not only negotiate a broader deal on a yearlong debt ceiling increase — which would most likely include spending and entitlement changes — but also negotiate over the terms for a stopgap spending measure that would reopen the government.

So, to sum up: (1) Carney was wrong. Obama is sticking to Reid’s position of not negotiating until the debt ceiling is raised and the shutdown ends, presumably because he expects (probably rightly) that Boehner won’t have the guts to shut it down again once it’s been re-opened no matter how badly negotiations go. (2) Republicans do indeed seem to be dropping their demands about ObamaCare and accepting Ryan’s plan, even though the whole point of a short-term debt-ceiling hike from the tea party/Heritage side was that it would allow the House to focus on ObamaCare and forget about deficit reduction and tax reform for the moment. (3) Boehner might not be able to pass anything right now. House conservatives would almost certainly kill a clean CR designed to meet Obama’s demand about re-opening the government; Boehner would need Democratic votes to do it and that would leave the GOP caucus in disarray before any meaningful negotiations began. He might not be able to even pass a clean short-term debt-ceiling hike since some House Republicans will refuse to raise the debt limit without spending cuts attached and others will want Obama to make concessions on the shutdown too before agreeing to support it. And House Democrats probably won’t save Boehner on this one since they need to line up behind Obama in opposition.

The good news here is that it’ll be much easier to blame Obama for a default now if we hit the debt ceiling. The not so good news is that we’re suddenly closer to actually hitting the ceiling than anyone thought. Here’s Reid, who really does seem to be quarterbacking the Democratic strategy at this point, from earlier this afternoon.

Update: Hearing now on Twitter that there’ll be further talks tonight. The GOP is putting its best spin on the meeting:

Update: New pressure on Boehner: Some Senate Republicans are also swinging around to Obama’s plan to end the shutdown too.

“I don’t think we’re serving any policy or political goals by keeping the government shut down,” said Sen. Jeff Flake, R-Ariz., who last Congress served in the House.

“I don’t think we should just address the debt limit and not address the shutdown,” said Sen. Kelly Ayotte, R-N.H.

“We have two issues, obviously, and they’ve become consolidated here because of the timing. But we need to deal with both the continuing resolution issue and the debt ceiling in a responsible way,” said No. 2 Senate Republican John Cornyn, R-Texas. “Doing just part of it doesn’t solve the whole problem and we need to solve the whole problem.”

Reid’s next move, I assume, will be to bring a bill that re-opens the government and raises the debt ceiling short term. He might very well get to 60 with Republican help, which would make support for Obama’s demand bipartisan. What does Boehner do then?

Update: Annnnnnd, not an hour after it went live on the Web, the Times’s story has been re-written to say that Obama and the GOP “failed to reach agreement” but they’re going to keep talking. The word “rejected” has been quietly dropped, maybe because it was a legit mischaracterization by the paper’s source or, maybe, because the rejection wasn’t supposed to leak lest the market freak out tomorrow morning. Here’s the new spin:

“I think it’s clear that he would like to have the shutdown stopped, and that would require a C.R.,” [GOP Rep. Hal] Rogers said, referring to a continuing resolution that would finance the government. “And we’re trying to find out what it is that he would insist upon in a C.R., and what we would insist upon. So our staffs are meeting, and we’ll talk later tonight.”