Koesterich said the weak first quarter is hanging over the market. "The overwhelming narrative is it was about the weather, the West Coast port strike and the economy comes back in Q2. The evidence is mixed ... to my mind, retail sales, which is something that was distorted by weather, will be very important for what it looks like in April now that those weather distortions have abated."
The wild trading in Treasurys continued Tuesday with the 10-year yield rising as high as 2.36 percent in morning trading, before reversing. That level was an area the market had previously held above from June 2013 up to November of last year.
"It does feel like it's topped out from a technical perspective," said David Ader, chief Treasury strategist at CRT Capital. "If I'm correct, and this is largely a positioning story, positions get squeezed. They get unwound. The pain runs its course. There's blood on the street, and it comes to an end."
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But he also noted that all bets are off if Wednesday's 1 p.m. EDT $24 billion, 10-year auction does not go well, or if the 8:30 a.m. retail sales number is stronger than expected that could ignite selling. Bond market selling has been making stocks nervous.
"I think all things being equal, the market will find its footing. It can't trade that much better at the moment," Ader said. The 10-year was at 2.24 percent in afternoon trading. "If that retail sales number is OK ... that probably gets us a bid in the 10-year. It will be a somewhat calming number. If it's below, I think you're going to see a good amount of buying ... if it's wildly good, the market won't like it."
Traders say it's not the level of yields but the speed at which the market took off that spooked stocks. Bond market strategists say the move in the 10-year and in the 30-year which rose above 3 percent, was not about economic fundamentals. Instead it was as technical move, with the U.S. market following European—especially bund—yields higher after months of following them lower on Europe's quantitative easing.
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They also blame a shortage of market liquidity to ease the move higher as well as creeping fears of inflation as energy and other commodities reversed course—a negative for global quantitative easing programs. Some strategists say this is a move to a new higher interest rate world, but it's hard to say where it will stop.
"The movement higher in yields is less explained by fundamentals, but more explained by technical factors such as a readjustment toward higher term, or risk, premia for bonds," said Jim Caron, global fixed income portfolio manager at Morgan Stanley Investment Management. "The NFP and 1Q GDP were weak, but that was trumped by a surge higher in term premia."
He said it's being driven in part by stabilizing energy prices, a pullback in the dollar and poor positioning in the long end of the market.
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Besides retail sales, there is also import prices for April at 8:30 a.m. and business inventories for March at 10 a.m.
Ader said he doesn't believe yields would have far to go even if they continued to move higher. "I just think the ability for this market to back up is going to be limited. The credit markets are trading quite well," he said, adding there hasn't been a widening of spreads in corporates that would happen if the markets were under stress or signaling a big change in rates.
What else to watch
There are some earnings Wednesday including Cisco, Macy's, Shake Shack, Ralph Lauren, Nissan and SAB Miller.