China Selloff Not So Scary

The markets waltzed to the old asset allocation tune Monday.

The 10-year Treasury bond yield opened Monday approaching 5%, which worried stock market participants that certain investors would take stock profits and move their money into bonds. The notion ended up pushing down bond yields in the second half of the day as stocks lifted back up to end the day in the green.

The Dow Jones Industrial Average ended the day up a fraction to close at 13,676.32, while the S&P 500 and the Nasdaq Composite closed up 0.2% to 1539.18 and 2618.29, respectively.

"There wasn't a single negative in last week's economic news," says Marc Pado, chief market analyst at Cantor Fitzgerald. "The only negative was that interest rates ticked up, but for the right reasons," he says, noting that jobs growth is strong, manufacturing is coming back, and inflation is low. But 5% on the 10-year Treasury bond is a potential "safety threshold," he says.

The 10-year Treasury bond initially rose, but ended the day down at 4.93%. It closed Friday at 4.96%.

The same type of decision-making may be going on in China, where the Shanghai Composite dropped 8.3% Monday. The plunge, its second of such magnitude this year, didn't damage global stock market indices the way the first one did in late February.