Art Cashin says the recent stock market bounce is premature — and here's why

Published Fri, May 8 20201:03 PM EDTUpdated Fri, May 8 20204:11 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Key Points

Longtime trader Art Cashin told CNBC on Friday the stock market's strong rally from the coronavirus-driven sell-off is premature, arguing the economic recovery will not be as robust as Wall Street anticipates.
"I don't think the rebound will be quite as strong as the stock market seems to indicate it could be," Cashin said on "Squawk Alley."

(This story is for CNBC Pro subscribers only.) Longtime trader Art Cashin told CNBC on Friday the stock market's strong rally from the coronavirus-driven sell-off is premature, arguing the economic recovery will not be as robust as Wall Street anticipates. "I don't think the rebound will be quite as strong as the stock market seems to indicate it could be," Cashin said on " Squawk Alley. " "I think the market's a little ahead of itself," he added. The major U.S. stock indexes have risen more than 30% since their March 23 lows, powered by unprecedented action from the Federal Reserve and increasing confidence among investors that economic restrictions meant to slow the spread of Covid-19 could be relaxed sooner than expected. Cashin, director of UBS floor operations at the NYSE, said he believes the market is not properly accounting for the prospect of a dramatically changed economic landscape, in which fear of liability and other concerns prevent a return to normal. "People, at least the ones I talk to, are experiencing a great deal of cabin fever," Cashin said. "People are really feeling the need to get out, and I think they're extrapolating that into what they think will be a V-shaped rebound." But the Wall Street veteran said he does not believe a V-shaped recovery — meaning a quick downturn and a quick bounce back — will happen. Bars and restaurants, for example, will have to reconfigure their operations to prevent the spread of Covid-19, Cashin said, limiting their capacity and, by extension, the strength of the economic rally. "There is an extraordinary caution among the businesses that, while they'd love to see the clients come roaring back, they're a little cautious there," he said. "And that makes me hesitant to see that this is going to be a V-shape." Cashin, whose career on the Street began nearly 60 years ago, said he feels this less bullish forecast is why the Dow Jones Industrial Average and S & P 500 are experiencing some resistance. Cashin said the key level for the Dow is 24,250 and 2,950 for the S & P. The Dow closed Thursday's session at 23,875 while the S & P settled at 2,881. "You need to kind of punch through there, you shouldn't skate through there. If you punch through there, the bulls will gain credibility and may indicate reopening the economy is not going to have negative results," Cashin explained.

(This story is for CNBC Pro subscribers only.)

Longtime trader Art Cashin told CNBC on Friday the stock market's strong rally from the coronavirus-driven sell-off is premature, arguing the economic recovery will not be as robust as Wall Street anticipates.

"I don't think the rebound will be quite as strong as the stock market seems to indicate it could be," Cashin said on "Squawk Alley." "I think the market's a little ahead of itself," he added.