A rise in the 10-year Treasury note yield above 3 percent would produce pain for the stock market, says Art Cashin, director of floor operations for UBS at the New York Stock Exchange.

The 10-year yield climbed to a 12-week high of 2.93 percent Friday after a strong November jobs report. "Stocks hesitated a little bit then," he told CNBC.

But the yield has since slipped back to 2.81 percent. And the Standard & Poor's 500 Index closed at a record high of 1,808.37 Monday. It stood at 1,804 Tuesday afternoon.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

The 10-year Treasury yield represents the "North Star" guide for stocks, Cashin noted. "If it [the 10-year yield] gets above 2.9 [percent], I think we're going to see some pressure [on stocks]," he said. "If it gets past 3 percent, I think you'd see some outright selling."

The stock market's strong gains from Friday may not last, he added. "Wall Street folklore says that big moves on the payroll day, both up and down, tend to dissipate over the next three days or so."

Cashin continues to see the band of resistance for the S&P 500 of 1,811 to 1,814. "If we break through that we could get some algorithmic follow-up buying because shorts are betting that it won't go through there, and if it goes through there they'll be forced to cover their shorts."

Now the stock market is focused on the possibility of a congressional budget agreement in coming days and on next week's Federal Reserve meeting.

"In front of the prospect of a budget deal and the Fed's meeting next week, there's a little bit of nervousness," Dan Greenhaus, chief global strategist at BTIG, told Bloomberg.

"You're inclined to trade sideways and I think that's what's happening. We had a very strong day on Friday, so some digestion of a more than 1 percent move up is not out of the question."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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