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Art Cashin: Housing Data Better Than it Looks?

Construction of new homes in the United States fell sharply last month to the lowest level since April, a sign of potential weakness in the economy's recovery.

Art Cashin, director of floor operations at UBS Financial Services, shared his insights on the housing data and what investors should watch for in the markets.

“[Housing] starts were down very sharply, but that might be weather-related because permits were only down slightly and if you’re a contractor and you’re having a rainy week, you might want to hold off on building a new home so you don’t get the added cost of doing it,” Cashin told CNBC.

“So you have to look under the headlines to see if it’s perhaps weather-related.”

Cashin said divergence is building in the market.

“The Russell 2000 and the NYSE average—we’re getting some hints that the small-cap stocks, which have led the rally, are now underperforming. The Russell looks like it’s topping just as the Dow looks like it’s breaking out,” he said.

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No immediate information was available for Cashin or his firm.