Wall Street's Art Cashin says Monday's plunge could be the 'washout selling' the stock market needs

Published Mon, Jan 24 202212:24 PM ESTUpdated Mon, Jan 24 20224:01 PM EST

Wall Street veteran Art Cashin told CNBC that Monday's plunge could be the kind of carnage that clears the sellers out of the stock market and allows buyers to come back in. Cashin said on "Squawk on the Street" he saw the market's recent march lower starting to develop earlier this month. On Wednesday, Jan. 12, the UBS director of NYSE floor operations said the market might be launching into a "small seasonal selling pattern." It turns out Jan. 12 was the last positive day for the Dow Jones Industrial Average . Two days later, he thought the evolving weakness in the market would result in selling into a bottom around Monday, Jan. 24. Now that Jan. 24 has arrived, Cashin said if the Dow were to fall between 800 and 1,000 points that may qualify for a "little bit of a washout selling." The Dow, at its lows for the Monday, dropped more than 1,000 points, or roughly 3%. The S & P 500 and Nasdaq , at their lows of the session, were down around 3.9% and roughly 4.8% each. Later in the day, all three stock benchmarks were off the worst levels of the session. The Dow last week had its worst weekly performance since October 2020 and its third straight weekly decline. The S & P 500 and Nasdaq had their worst weeks since March 2020, just after the Covid pandemic was declared. They, respectively, dropped for three and four weeks in a row. As of Friday's close, the Nasdaq was firmly in correction territory, down 14% from its November record close. The S & P 500 and Dow were down 8% and 7% from their record closes earlier this month. Cashin said he expects the Federal Reserve to "slow their step a little bit" due to nerves about the stock market's current direction, and Fed Chairman Jerome Powell 's reluctance to get the blame for the currently tumultuous trading. "Believe me, I think they will have the market's back if things turn worse," Cashin said. "If we don't bottom here and turn around, and they keep selling into late spring, early summer, I think you'll see a little bit of a difference." Rollbacks of federal stimulus programs in place during the pandemic explains one of the reasons why the stock market continues to drop without bond yields increasing, Cashin said. He believes inflation will decrease as supply chain snags unravel especially after the