Surging Yields Crush Stocks

Around the world, central banks have been tightening in order to keep their economies from expanding too rapidly. When price levels are generally rising, the demand for fixed-income securities is diminished because investors worry the interest they're being provided will be eroded by inflation. That leads to selling pressure.

Eventually though, yields reach a point where buyers, finding the rate of return on bonds so alluring, come in and stop the price decline. For stocks, that can mean lingering downward stress as investment funds seek out the most generous payday.

Selling accelerated after Pimco bond guru Bill Gross made bearish comments. As the day neared its finish, he said the yield on the 10-year Treasury could go as high as 6.5% sometime in the next five years. Before that, the top end of his range was 5.5%.

The dollar was firmer against most major currencies, including the euro and the pound.

As for stocks, the nation's chain stores were reporting their monthly results. Costco (COST Quote) said same-store sales were up 7% last month, beating estimates, and at Jos. A. Bank, (JOSB Quote) comps were much better than expected, rising 13.5%.

Sales at Limited (LTD Quote) and Pacific Sunwear (PSUN Quote) were also stronger, while Chico's (CHS Quote) and Bebe Stores (BEBE Quote) had negative readings.

Wal-Mart, the world's largest retailer, saw its shares fall almost 2% after its same-store sales climbed 1.3% in May, toward the lower end of its expectations.

Among research calls, Lehman Brothers upgraded General Dynamics (GD Quote) and downgraded Procter & Gamble (PG Quote). Raymond James lowered its rating on Chipotle (CMG Quote).

Overseas, stocks were mixed in Asia. Tokyo's Nikkei tacked on 0.1%, and Hong Kong's Hang Seng slipped 0.1%. London's FTSE surrendered 0.3%, and Frankfurt's DAX tanked by 1.4%.

Turning to commodities, crude futures rose 97 cents to $66.93 a barrel, and gold was softer by $9.40 to $665.20 an ounce.

The economic calendar again didn't have much, but weekly initial jobless claims declined by 1,000 last week to 309,000.

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