Updated from 4:13 p.m. EDT

Stocks in New York sold off for the third time in as many sessions and closed sharply lower Thursday as bond yields skyrocketed.

The

Dow Jones Industrial Average

was down 198.94 points, or 1.5%, at 13,266.73. The

S&P 500

was off 26.66 points, or 1.8%, at 1490.72, and the

Nasdaq Composite

was lower by 45.80 points, or 1.8%, at 2541.38.

Every one of the 30 Dow components were negative. The worst performers included

Wal-Mart

(WMT) - Get Report

,

Microsoft

(MSFT) - Get Report

,

3M

(MMM) - Get Report

and

AT&T

(T) - Get Report

.

More broadly, homebuilders and utilities were some of the hardest hit sectors.

The last three days have been rough for the stock market. During Tuesday and Wednesday, the industrials lost more than 200 points, including a drop of 129.79 last time out. The S&P shed about 22 points, and the Nasdaq fell 31 points.

Weighing on the mood of late has been a decrease in bond prices and the corresponding ascent in yields. Around 4 p.m. EDT, the 10-year Treasury note was sinking 1 5/32 in price, yielding 5.12%, the first time it has been above 5% since last August.

The 30-year bond was diving 2 1/32, sending the yield all the way up to 5.22%.

The moves followed a surprise hike in New Zealand and came one day after the European Central Bank took rates up by a quarter-point. Meanwhile, the Bank of England left its benchmark rate unchanged, as had generally been predicted.

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) - Get Report

said same-store sales were up 7% last month, beating estimates, and at

Jos. A. Bank

,

(JOSB)

comps were much better than expected, rising 13.5%.

Sales at

Limited

(LTD)

and

Pacific Sunwear

(PSUN)

were also stronger, while

Chico's

(CHS) - Get Report

and

Bebe Stores

(BEBE)

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) - Get Report

and downgraded

Procter & Gamble

(PG) - Get Report

. Raymond James lowered its rating on

Chipotle

(CMG) - Get Report

.

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.