Global stocks sink as bond yields, dollar regain traction

By Hilary Russ

NEW YORK (Reuters) - A six-day rebound in world stocks sputtered on Tuesday, hurt by rising bond yields and disappointing earnings from U.S. retailers, while the U.S. dollar extended a rebound from three-year lows.

Pressured by higher yields, Wall Street's main equity indexes fell after six straight days of gains as the market reopened following the Presidents' Day holiday on Monday.

Shares of the world's biggest brick-and-mortar retailer Walmart slumped more than 9 percent after the company reported a lower-than-expected profit and a sharp drop in online sales growth during the holiday period.

Shares of other retail majors Target and Costco Wholesale also fell, dragging the S&P consumer staples index down 1.93 percent.

The Dow Jones Industrial Average fell 188.27 points, or 0.75 percent, to 25,031.11, the S&P 500 lost 10.19 points, or 0.37 percent, to 2,722.03 and the Nasdaq Composite added 11.76 points, or 0.16 percent, to 7,251.23.

World equity markets also sank, with the MSCI's gauge of stocks across the globe shedding 0.42 percent. Emerging market stocks lost 0.58 percent, and Asian stocks were also subdued.

MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.38 percent lower, while Japan's Nikkei lost 1.01 percent.

European shares held steady, supported by softer domestic currencies. The pan-European FTSEurofirst 300 index rose 0.22 percent.

Investors looking to the greenback shrugged off worries about the U.S. budget deficit, focusing on large U.S. government debt auctions this week and sending the dollar higher.

"What we are seeing is just a little bit of profit-taking (in other currencies), a little bit of bargain-hunting," said Omer Esiner, chief market strategist with Commonwealth Foreign Exchange in Washington.

"Given the focus on the deficit, the dependence on foreign investment, I think we will have to see relatively strong demand at these auctions," he said.

U.S. Treasury yields rose on Tuesday, with the benchmark 10-year yield hovering near a four-year peak as investors made room for this week's deluge of $258 billion of government debt supply.

The dollar index, tracking the unit against key world currencies, rose 0.59 percent, continuing its rebound from three-year lows. The euro was last 0.51 percent lower at $1.2344.

The stronger dollar and uncertainty about big Treasury auctions weighed on gold prices, which dropped for a third session.

Spot gold dropped 0.6 percent to $1,338.00 an ounce.

EMERGING PRESSURE

The dollar's rebound also meant most emerging market currencies were under pressure.

South Africa's rand and Turkey's lira both gave back more of their recent gains, while growing concerns about fraud at India's second-largest state-run bank sent the rupee skidding to a near three-month low.

U.S. crude rose 0.31 percent to $61.74 per barrel. However, Brent was last at $65.12, down 0.84 percent on the day, under pressure from a stronger dollar and a bout of profit taking.

(Reporting by Hilary Russ in New York; Additional reporting by Marc Jones and Eric Onstad in London; Saqib Iqbal Ahmed and Richard Leong in New York; Editing by Bernadette Baum)