The traditional "Santa Claus" rally should remain on track, but mortgage applications dropping for the second straight week to a 13-year low may cause a post-holiday hangover for markets, UBS' Art Cashin said Tuesday.
"The Grinch that might steal Christmas, but will likely steal part of the New Year, is mortgage applications," Cashin said on "Squawk on the Street." "And as [mortgage] rates have been inching up, they have been moving down."
(Read more: US bond market selloff weighs on mortgage apps)
Mortgage applications for refinancing and new purchases fell 6.3 percent to their lowest levels since December 2000, because of a sell-off in the bond market after the Federal Reserve's decision to taper its bond purchasing program, the Mortgage Bankers Association reported Tuesday. But the mortgage application data contrasted with strong stock performances and a surge in durable good orders last month.
Asked about other issues worrying him going into 2014, Cashin said: "Success."
Cashin said he's worried that borrowing and spending could pick up and cause the Fed to overcompensate.
(Read more: Cashin: Why 'I hear Santa's sleigh bells ringing')
"Velocity in the money supply may get the Fed into a minor panic, and I think they may overstep themselves by accelerating tapering that would be disruptive to the market," Cashin said.
— By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street." Reuters contributed to this report.