Wall Street veteran Art Cashin told CNBC on Thursday that investors continue to worry about the Federal Reserve’s handle on the bond market, leading to choppy trading. “It doesn’t matter whether they lost control or not. If the market believes they lost control, that’s just as dangerous and damning,” Cashin, the director of floor operations for UBS, said on “Squawk on the Street.” Cashin’s comments came before Fed Chair Jerome Powell appeared at The Wall Street Journal Jobs Summit around noon Thursday. “I don’t think he can have a magic wand,” Cashin said, but he stressed investors wanted assurance from Powell that the Fed would be able to “maintain control” of bond yields and inflation expectations. Indeed, U.S. equity indexes fell Thursday afternoon as yields rose during Powell’s interview. The move in yields came after Powell did not make a strong hint that the central bank would change its asset purchases. Cashin mentioned before Powell’s appearance that the Fed chair may be able to assuage trader worries if he discussed a potential “Operation Twist,” in which it sells short-term bills and buys longer-duration bonds. Cashin, whose career on the Street spans about 60 years, said investors are really keyed in on developments around Covid vaccine administration and its implications for a robust recovery for the U.S. economy. While that is likely to be positive for companies — such as airlines — that have suffered revenue declines during the pandemic, Cashin said the pace of that economic rebound is critical for the market. “The good news is the reopening is here, and that’s part of traders having doubt about the reopening, ‘Will the economy suddenly flare up instead of coming along slightly?” he said, explaining that a major spike in activity would further inflame inflation fears. “You’ve got some people with estimates of 5%, 6%, or even 7% [GDP] growth. That’s super but if it comes at the cost of much higher prices forcing the Fed to act, that’s something the market is not ready for,” added Cashin, while acknowledging Powell has continued to stress that the central bank is committed to its current policy . Another area of recent focus for Wall Street has been sudden jumps in heavily shorted stocks and social-media chatter about them. While GameStop has been the most prominent example of a so-called meme stock, other companies that have recently seen shares soar, albeit briefly, include Rocket Companies and Tanger Factory Outlet Centers Cashin advised newcomers to the equity market to exercise caution before jumping into trades they see gaining traction on message boards, suggesting big-money players with their own goals could be involved, too. “This is based on 60 years of cynical trading. I remember chat rooms and things like Iomega and whatever. I’ve seen this game before, not necessarily just like this, but rather like this,” Cashin said. “Folks should be careful.”
Traders work on the floor of the New York Stock Exchange.
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Wall Street veteran Art Cashin told CNBC on Thursday that investors continue to worry about the Federal Reserve’s handle on the bond market, leading to choppy trading.
“It doesn’t matter whether they lost control or not. If the market believes they lost control, that’s just as dangerous and damning,” Cashin, the director of floor operations for UBS, said on “Squawk on the Street.”
Cashin’s comments came before Fed Chair Jerome Powell appeared at The Wall Street Journal Jobs Summit around noon Thursday.
“I don’t think he can have a magic wand,” Cashin said, but he stressed investors wanted assurance from Powell that the Fed would be able to “maintain control” of bond yields and inflation expectations.
Indeed, U.S. equity indexes fell Thursday afternoon as yields rose during Powell’s interview. The move in yields came after Powell did not make a strong hint that the central bank would change its asset purchases.
Cashin mentioned before Powell’s appearance that the Fed chair may be able to assuage trader worries if he discussed a potential “Operation Twist,” in which it sells short-term bills and buys longer-duration bonds.
