If it makes you uncomfortable, it's creepy. We all have different tolerance levels for certain behaviors but as they get more extreme, more and more of us reject them. But even if you're the only one feeling uncomfortable with something, that doesn't invalidate your feelings. Trust your instincts. Go with your own feelings.
Me? I'd have smiled back. 🙂 But then, I live in Houston, Texas, and people tend to be friendly here with lots of smiles, hellos when eye contact is made, or a smile and a nod of the head as you pass.