"I'd be more comfortable with the auction coming at 2.85 percent . It will probably be okay here, if we back up (in yield) tomorrow," said Briggs, adding he expects only a modest move higher. The 10-year yield briefly reached a high of 3 percent before the Fed's September meeting.
(Read more: Stocks could 'headfake' as much as 5% lower: Lee)
Rose said the move higher in rates since Friday was a bit more than he had been forecasting, but it was in line with the jobs data. "We look at the misses versus the consensus and then we add the previous month's revision and regress that with its rate change. This year it's about 16 basis point per 100,000 miss," he said.
Friday's employment report showed the economy added 204,000 jobs in October, well above the 125,000 expected by economists, and a shocker to a market that expected to see a big miss rather than a gain due to the government shutdown. Another 60,000 jobs were added to August and September in revisions.
"People are talking a little more about December tapering than they were on Friday," Rose said. He said if the next jobs report is also strong that could move the Fed's timetable, and that could move rates higher.
He noted that the 10-year was at 2.85 percent in September when many investors believed the Fed was about to announce a tapering of its QE program. So that would be a reasonable level if it seems like the Fed would taper.
Rose expects the auction to go well. "I think demand will be there. We've got the best level that we've had coming into an auction since September," he said.
(Read more: Fund managers:Stocks expensive, hold onto cash)
Knapp said the stock market is keeping a close eye on rates, but he does not expect the stock market to react badly yet.
"We're in this period of seasonality and it's pretty rare that the market would get rocked at this time of year," he said. "My feeling is the stock market is going to have to really get hit over the head with tapering before it starts believing it."
Some analysts say stocks will adjust to higher rates as long as they do not move higher too quickly.
Knapp said his concern is that the Fed will not be able to keep rates under control while it winds down its asset purchases. "The Fed is trying to decouple interest rate policy from asset purchases," he said, noting the Fed would like to keep its short term Fed fund target rate lower for longer. Knapp said the market could start moving ahead of the Fed as it begins tapering, on expectations that it will raise rates.
He expects the economy to do better next year, and accelerate. While stocks should do well, he expects them to hit a rough spot when the Fed tapers.
(Read more: Jobs shocker may force Fed hand on slowing easing)
What Else to Watch
The Federal budget is released at 2 p.m. Wednesday. Earnings are expected from Macy'sand Canadian Solar, before the bell. Cisco, NetApp and Seaworld report after the closing bell.
Markets are also watching the steep decline in oil prices, which have been helping bring down the price of gasoline. According to AAA, the national average for gasoline was $3.18 a gallon Tuesday.
The Fed speculation was a factor in oil markets Tuesday, but the bigger weight on prices was from expectations that the government data Thursday will show another build in supply.
John Kilduff of Again Capital said the renewed strength of the dollar was also hurting oil.
(Read more: The deceptively simple reason stocks won't quit)
West Texas Intermediate oil fell further after breaking below last week's low of $93.07, and traded below $93 for first time since June 24. WTI settled at $93.04, its lowest settlement since May 31.
API releases its inventory data Wednesday afternoon.
"What happened is the market kept falling and once we got close to last week's four month low, it triggered another wave of technical selling. Basically it expanded the lower side of our trading range." said Gene McGillian, analyst with Tradition Energy.
—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.