US stocks drop as bond yields spike

US stocks fell early Tuesday as worries about spiking bond yields outweighed news that Verizon would buy AOL for $4.4 billion.

About 30 minutes into trade, the Dow Jones Industrial Average was at 17,972.23, down 132.94 points (0.73 percent).

The broad-based S&P 500 dropped 15.32 (0.73 percent) to 2,090.01, while the tech-rich Nasdaq Composite Index lost 50.10 (1.00 percent) at 4,943.64.

Bond yields in the US lingered at high levels after a big jump Monday. Similar shifts were also roiling European equity markets as bond prices, which move inversely to yields, sank.

"Fear over the accelerating bond market rout is causing a collapse of European stocks on Tuesday and feeding through to a considerably lower US market open," said a post from Jasper Lawler of CMC Markets.

AOL shot up 17.9 percent on news the Internet pioneer would be bought by Verizon for $4.4 billion in an effort to boost the telecom giant's presence in online media and advertising. Verizon fell 0.4 percent.

Apparel retailer Gap lost 2.8 percent as global comparable sales in April 2015 tumbled 12 percent compared with last year.

Insurer PartnerRe gained 1.7 percent as the Italian investment firm Exor raised its bid for the company from $6.4 billion to $6.8 billion.

Cloud computing company Rackspace Hosting plummeted 13.3 percent after reporting that first-quarter net income rose 11.8 percent to $28.4 million. Analysts cited a disappointing sales outlook.

Dow member Pfizer dipped 0.5 percent following news it bought a minority equity stake in AM-Pharma, a privately held Dutch biopharmaceutical company, for $87.5 million.

Pfizer has an exclusive right to buy the remaining stake for up to $512.5 million following testing of AM-Pharma's treatment under developement for acute kidney injury.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.29 percent from 2.28 percent Monday, while the 30-year advanced to 3.06 percent from 3.05 percent Monday.