By Lewis Krauskopf
NEW YORK (Reuters) - The yield on the benchmark U.S. 10-year Treasury note hit its highest point in about seven years on Tuesday on the heels of a report that indicated a pick up in consumer spending, pushing the dollar to its highest level this year and weighing on stocks.
The 10-year yield neared 3.1 percent, blowing through the key psychological level of 3 percent it hit in late April for the first time in four years.
Wall Street's main indexes slumped, with investors concerned that rising bond yields would hurt stock valuations. The dollar's rise also helped pushed down gold to its low point for the year.
Data showed that U.S. retail sales rose moderately in April as higher gasoline prices cut into discretionary spending, but consumer spending appeared on track to accelerate after slowing sharply in the first quarter.
"The implication is that means inflation has more upside potential, which means the Fed is more likely than not to hike four times this year, versus what the market was pricing in a month ago, which is two to three times," Mackay said.
Benchmark 10-year notes
The dollar index <.DXY>, tracking it against six major currencies, rose 0.63 percent, with the euro
On Wall Street, the Dow Jones Industrial Average <.DJI> fell 191.98 points, or 0.77 percent, to 24,707.43, the S&P 500 <.SPX> lost 19.4 points, or 0.71 percent, to 2,710.73 and the Nasdaq Composite <.IXIC> dropped 64.97 points, or 0.88 percent, to 7,346.35.
"The reason why equity market is falling today is because we are once again pondering if the strength of the U.S. economy is enough to make the Fed raise faster in the future," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co in Milwaukee, Wisconsin.
After improved trade sentiment helped stocks on Monday, equities were again jostled by developments involving U.S.-China talks.
Earlier on Tuesday, U.S. Ambassador to China Terry Branstad said the United States wanted a timetable on how China would open up its markets to U.S. exports, with the two countries still not close to resolving trade frictions.
"A little bit of today's jitters are related to a hangover to yesterday's wrongly placed exuberance that a trade deal was imminent and the reality is we are in for a long slugfest between the U.S. and China," Mackay said.
The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.14 percent.
MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.86 percent amid weak economic data from Germany and China.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)