Wall Street this week expects Democrats in the House of Representatives will move to pass multiple bills that could reopen nine unfunded federal departments individually and avert a delay in tax refunds, veteran trader Art Cashin told CNBC on Monday.
But if lawmakers and President Donald Trump fail to make progress on negotiations to end the partial government shutdown, markets will take a hit later this week, he said.
"That will hurt anybody's popularity if people don't get the [tax] refund they're expecting, and it will hurt the economy," the UBS director of floor operations at the New York Stock Exchange said on "Squawk on the Street."
About 800,000 federal employees have been furloughed or are working without pay since the shutdown kicked in on Dec. 22. Included on that list is the IRS, where as many as 52,000 workers could be affected, as taxpayers prepare to file for refunds as soon as this month.
The partial shutdown has now stretched 17 days and ranks among the longest in U.S. history. Trump is rejecting any spending bill, including a package the House passed last week, that does not include more than $5 billion for his border wall on the U.S.-Mexico border.
Congressional Democrats say they refuse to earmark money for the project, particularly on the grounds that Trump said Mexico would pay for the barrier. Speaker Nancy Pelosi on Saturday said her party would introduce piecemeal appropriation bills this week seeking to reopen agencies, starting with the Treasury Department and IRS, in efforts to debate border security with a fully functioning government.
Since the shutdown went into effect days before Christmas, the Dow Jones Industrial Average has climbed more than 1,300 points over 9 trading days. The S&P 500 is up 6.7 percent, and the Nasdaq Composite is up 9 percent.
"So we'll see if that process goes well, then this kind of benign attitude is justified," Cashin said. "If they are unable to work out something like that and they just stay where they are today then I think it will negatively begin to impact the market."