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GLOBAL MARKETS-U.S. yields hit new heights; oil skids amid COVID-19 fears in Europe

* Wall Street drops, tech-heavy Nasdaq tumbles 3%

* 10-yr U.S. yield tops 1.75% as investors digest Fed

* Oil plunges 7% as dollar strength also weighs

* France locks down Paris amid COVID-19 caution (Adds close of U.S. trading, fresh analyst comments)

NEW YORK/LONDON, March 18 (Reuters) - Benchmark U.S. Treasury yields hit 14-month peaks on Thursday, putting fresh pressure on tech and other stocks as investors digested the Federal Reserve’s latest meeting, while concerns over COVID-19 cases in Europe also sapped risk appetite and helped pummel oil prices.

The benchmark S&P 500 fell from record highs and the tech-heavy Nasdaq slumped 3%, while MSCI’s gauge of stocks across the globe shed 0.77%.

Investors said markets were continuing to react to the Fed meeting and Chairman Jerome Powell’s news conference a day earlier. The central bank said the U.S. economy is heading for its strongest growth in nearly 40 years as it recovers from the COVID-19 crisis and policymakers are pledging to keep their foot on the gas despite an expected surge of inflation.

“Rates are the key part of the entire story of the market,” said Keith Lerner, chief market strategist at Truist Advisory Services. “Within the 10-year itself, there is so much being fed into that in terms of expectations of the economy, expectations of inflation.”

Oil prices tumbled, falling for a fifth day in a row, on growing worries about rising COVID-19 cases in Europe as several large economies have had to reimpose lockdowns.

France’s prime minister imposed a month-long lockdown on Paris and parts of the north after a faltering vaccine rollout and spread of highly contagious coronavirus variants forced President Emmanuel Macron to shift course.

“A best-case scenario for demand recovery had been priced into this market. Everyone was celebrating the vaccine rollout and reduced restrictions,” said John Kilduff, partner at Again Capital LLC in New York. “Now in Europe, it’s gone off the rails almost completely.”

A rally in the dollar, which was supported by higher U.S. bond yields, also pressured oil prices, as a stronger dollar makes oil more expensive for holders of other currencies.

Brent crude futures settled down $4.72, or 6.9%, at $63.28 a barrel, while U.S. crude oil futures settled at $60 a barrel, down $4.60, or 7.1%.

On Wall Street, the Dow Jones Industrial Average fell 153.07 points, or 0.46%, to 32,862.3, the S&P 500 lost 58.66 points, or 1.48%, to 3,915.46 and the Nasdaq Composite dropped 409.03 points, or 3.02%, to 13,116.17.

Energy and tech were the biggest S&P 500 sector decliners, while financials, which are sensitive to bond yields, were the lone major group in positive territory.

The pan-European STOXX 600 index rose 0.40%.

The yield on the 10-year U.S. Treasury note rose as high as 1.754%, its highest level since January 2020.

Benchmark 10-year notes last fell 21/32 in price to yield 1.7135%, from 1.641% late on Wednesday.

“The Fed has given a little bit of a green light to higher rates and the reason is pricing to reality, pricing to this stronger economic environment,” said Tony Rodriguez, head of fixed income strategy at Nuveen.

Data showed the number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the labor market is regaining its footing as an acceleration in the pace of vaccinations leads to more businesses reopening.

The U.S. dollar rallied across the board, as higher Treasury yields helped it recoup losses from the previous session.

The dollar index rose 0.524%, with the euro down 0.56% to $1.1911.

Additional reporting by Scott DiSavino and Sinead Carew in New York, Noel Randewich in San Francisco, Karen Pierog in Chicago, Ritvik Carvalho in London; editing by Larry King, Will Dunham, Jonathan Oatis and Dan Grebler

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