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U.S. bond yield hits 7-year high, boosting dollar, hurting stocks

Reuters  |  NEW YORK 

By Lewis Krauskopf

(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. 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 said rose 0.3 percent last month, while data for March was revised up to show sales surging 0.8 percent instead of the previously reported 0.6 percent.

The data indicated consumer spending is stronger than expected by the market, said Jon Mackay, at North America in

"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 in a month ago, which is two to three times," Mackay said.

Benchmark 10-year notes last fell 26/32 in price to yield 3.0889 percent, from 2.995 percent late on Monday, rising to its highest point since July 2011.

The dollar index <.DXY>, tracking it against six major currencies, rose 0.63 percent, with the euro down 0.62 percent to $1.1851.

On Wall Street, the Dow Jones Industrial Average <.DJI> fell 191.98 points, or 0.77 percent, to 24,707.43, the <.SPX> lost 19.4 points, or 0.71 percent, to 2,710.73 and the <.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. is enough to make the Fed raise faster in the future," said Brent Schutte, at in Milwaukee,

After improved trade sentiment helped stocks on Monday, equities were again jostled by developments involving U.S.-talks.

Earlier on Tuesday, U.S. to said the wanted a timetable on how 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.

shares fell 1.2 percent after the missed Wall Street's sales forecast.

The pan-European index <.FTEU3> rose 0.14 percent.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.86 percent amid weak economic data from and China.

hovered around multi-year highs, supported by concerns that U.S. sanctions on are likely to restrict from one of the biggest producers in the

U.S. crude rose 0.55 percent to $71.35 per barrel and Brent was last at $78.41, up 0.23 percent on the day.

Spot gold dropped 1.8 percent to $1,289.21 an ounce, touching its lowest point of the year.

(Additional reporting by and in New York, Medha Singh in Bengaluru and Alasdair Pal in London; Editing by and Nick Zieminski)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 00:17 IST