(Bloomberg) -- The stock market got hit in the final minutes of US trading on concern that Washington lawmakers are struggling to find common ground and hammer out a deal to prevent a historic default.

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Equities finished near session lows, with the Dow Jones Industrial Average sinking 1%. House Speaker Kevin McCarthy said negotiators are far apart after his meeting with President Joe Biden, while acknowledging that a debt-ceiling deal is still possible.

“Since both sides know what is at stake, default is improbable,” said Seema Shah, chief global strategist at Principal Asset Management. “However, every day closer to the Treasury’s June 1 deadline without a resolution will likely elevate volatility in markets, trim demand for US risk assets, and even expedite recession.”

Yields rose across the US curve, with the rate on 30-year notes climbing to around 3.9% — the highest since the run-up to the banking turmoil that erupted in early March — amid Pfizer Inc.’s $31 billion debt sale.

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The mood among global fund managers soured further in May, with investors flocking to cash amid concerns that a recession and credit crunch are looming, according to Bank of America Corp.’s latest survey.

The sentiment among fund managers deteriorated to the most bearish this year, with 65% of survey participants now expecting a weaker economy, BofA’s poll showed.

Federal Reserve Bank of Cleveland President Loretta Mester said the central bank is unable to do much about slow long-term economic growth, but can “do its part” by curbing prices. Her Richmond counterpart Thomas Barkin said he was still looking to be convinced that inflation has been defeated and that he’d support raising rates further if needed.

US retail sales increased in April, suggesting consumer spending is holding up in the face of economic headwinds including inflation and high borrowing costs.

“There is nothing in this series that will take a June rate hike off the table — although we are doubtful one comes to fruition,” said Ian Lyngen at BMO Capital Markets. “Instead, the Fed will err on the side of retaining terminal for as long as possible as economic headwinds continue to mount, but remain contained for the time being.”

Key events this week:

• Eurozone CPI, Wednesday

• BOE Governor Andrew Bailey delivers keynote speech, Wednesday

• US housing starts, Wednesday

• US initial jobless claims, Conference Board leading index, existing home sales, Thursday

• Japan CPI, Friday

• ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday

• New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.6% as of 4 p.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average fell 1%

• The MSCI World index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.1% to $1.0863

• The British pound fell 0.4% to $1.2480

• The Japanese yen fell 0.1% to 136.32 per dollar

Cryptocurrencies

• Bitcoin fell 1.5% to $26,933.21

• Ether fell 0.5% to $1,816.84

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.53%

• Germany’s 10-year yield advanced four basis points to 2.35%

• Britain’s 10-year yield was little changed at 3.82%

Commodities

• West Texas Intermediate crude fell 0.8% to $70.56 a barrel

• Gold futures fell 1.4% to $1,993.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Isabelle Lee and Carly Wanna.

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