US Markets

Cashin: The markets need to close above this level

Cashin: Still a rebound rally

Traders are focusing on silver linings in the weaker-than-expected January employment report, UBS' Art Cashin told CNBC on Friday.

Despite falling short of consensus estimates, the January employment report contained a 6.6 unemployment rate—down 0.1 from December—and increasing labor participation. Those factors made traders disregard the sluggish job growth of 113,000, said Cashin, UBS' director of floor operations at the NYSE.

The jobs data also showed younger workers entering the labor force at a faster clip, Cashin said.

"The market decided at first that the headline number was terrible, and then it said, 'You know, this isn't too bad,'" Cashin said on "Squawk on the Street."

If the can close at 1,785, that can set up Wall Street with a strong foundation for next week, he said. Thursday's rebound marked a departure from the stock market's weeks-long pullback, which saw a selloff this Monday, a disappointing January and a flight to safety from stocks into bonds.

(Read more: US stocks rally after jobs report; turn positive on the week)

Cashin said the selling, spurred by concerns about the U.S. economy and emerging markets, could be coming to a close.

"It might suggest that it might be winding down," Cashin said. "I'm not sure that it's run its course. You won't know that for a couple of days. If we can close above 1,785 that can give the bulls a little bit of a chance."

—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street."