U.S. stocks closed lower on Monday, giving back some of Friday's rally on the jobs report, as investors eyed gains in bond yields and awaited the week's data releases. (Tweet This)
"You've got a global selling of bonds, not sure of the largest catalyst there," said Art Hogan, chief market strategist at Wunderlich Securities. "The disarray in the bond market is causing disarray in the equity market."
The Dow Jones industrial average closed down 85.95 points, recovering from a brief 100-point drop. The other large-cap indices ended lower, with the Nasdaq below 5,000. The Russell 2000 held higher.
There's "cautiousness as a result of traders watching rates back up to 2015 highs. That's certainly having a limiting effect on gains," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management (U.S.). He noted the absence of major market-moving news and economic reports on Monday and Tuesday.
The U.S. 10-year Treasury yield gained to 2.27 percent. The 30-year bond yield topped 3.03 percent. The German 10-year bund yield rose to 0.62 percent.
"It's a relatively low volume trade. It's not capitulation as much as it is reluctance to stand in front of the move," Ian lyngen, senior treasury strategist at CRT said of the bond market movements.
"We are challenging the high yield level seen last week and I think a basic concession ahead of the refunding auction doesn't explain it," he said. The Treasury auctions 3-year notes tomorrow, 10-years on Wednesday and 30-year bonds Thursday.
"The selloff in Treasurys is outpacing the selloff in bunds today," he said, adding that Mondays are notoriously low liquidity days.
But traders said many of the factors from last week were still at work, and the Treasury market selloff came after prices were lifted (and yields fell Thursday and Friday).