* 10-yr US yield nears 3.1 pct, hits highest since July 2011
* Data shows U.S. consumer spending picking up
* Dollar hits 2018 peak, Wall Street indexes drop
* Oil prices gain, boosted by Iran fears (Updates with afternoon trading)
By Lewis Krauskopf
NEW YORK, May 15 (Reuters) - The yield on the benchmark U.S. 10-year Treasury note hit its highest point in about seven years on Tuesday on the heels of a report that indicated a pick up in consumer spending, pushing the dollar to its highest level this year and weighing on stocks.
The 10-year yield neared 3.1 percent, blowing through the key psychological level of 3 percent it hit in late April for the first time in four years.
Wall Street's main indexes slumped, with investors concerned that rising bond yields would hurt stock valuations. The dollar's rise also helped pushed down gold to its low point for the year.
Data showed that U.S. retail sales rose moderately in April as higher gasoline prices cut into discretionary spending, but consumer spending appeared on track to accelerate after slowing sharply in the first quarter.
The U.S. Commerce Department said retail sales rose 0.3 percent last month, while data for March was revised up to show sales surging 0.8 percent instead of the previously reported 0.6 percent.
The data indicated consumer spending is stronger than expected by the market, said Jon Mackay, investment strategist at Schroders North America in New York.
“The implication is that means inflation has more upside potential, which means the Fed is more likely than not to hike four times this year, versus what the market was pricing in a month ago, which is two to three times,” Mackay said.
Benchmark 10-year notes last fell 26/32 in price to yield 3.0889 percent, from 2.995 percent late on Monday, rising to its highest point since July 2011.
The dollar index, tracking it against six major currencies, rose 0.63 percent, with the euro down 0.62 percent to $1.1851.
On Wall Street, the Dow Jones Industrial Average fell 191.98 points, or 0.77 percent, to 24,707.43, the S&P 500 lost 19.4 points, or 0.71 percent, to 2,710.73 and the Nasdaq Composite dropped 64.97 points, or 0.88 percent, to 7,346.35.
"The reason why equity market is falling today is because we are once again pondering if the strength of the U.S. economy is enough to make the Fed raise faster in the future," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co in Milwaukee, Wisconsin.
After improved trade sentiment helped stocks on Monday, equities were again jostled by developments involving U.S.-China talks.
Earlier on Tuesday, U.S. Ambassador to China Terry Branstad said the United States wanted a timetable on how China would open up its markets to U.S. exports, with the two countries still not close to resolving trade frictions.
“A little bit of today’s jitters are related to a hangover to yesterday’s wrongly placed exuberance that a trade deal was imminent and the reality is we are in for a long slugfest between the U.S. and China,” Mackay said.
Home Depot shares fell 1.2 percent after the home improvement chain missed Wall Street's sales forecast.
The pan-European FTSEurofirst 300 index rose 0.14 percent.
MSCI's gauge of stocks across the globe shed 0.86 percent amid weak economic data from Germany and China.
Oil prices hovered around multi-year highs, supported by concerns that U.S. sanctions on Iran are likely to restrict crude oil exports from one of the biggest producers in the Middle East.
U.S. crude rose 0.55 percent to $71.35 per barrel and Brent was last at $78.41, up 0.23 percent on the day.
Spot gold dropped 1.8 percent to $1,289.21 an ounce, touching its lowest point of the year.
Additional reporting by Saqib Iqbal Ahmed and Kate Duguid in New York, Medha Singh in Bengaluru and Alasdair Pal in London; Editing by Bernadette Baum and Nick Zieminski