ART CASHIN: The market could face a big test at 1PM

Art cashinREUTERS/Brendan McDermidArt Cashin, warning the market to be ready this afternoon.

At 1:00 p.m. ET on Friday, Federal Reserve chair Janet Yellen will speak on the US economy.

And this could be a big test for the market.

In his morning note on Friday, UBS’ Art Cashin said Yellen could use this speech as a way to see how the market responds to a stronger implication that the Fed is close to raising interest rates.

Here’s Cashin:

Today — Wall Street desks are expected to be manned by skeleton crews as half of the gang are planning on extending their holiday weekends. And, after Yellen speaks at 1:00, nearly half the skeletons will leave early … Consensus — As just noted, there are lots of reasons to assume a slow thinly traded day. Yellen may want to sound a bit more hawkish in order to “test” markets and gauge their potential vulnerability. We’ll see. Stay wary, alert and very, very nimble. Have a wonderful Memorial Day Weekend!

Yellen is expected to discuss the US economic outlook in a speech before the Greater Providence Chamber of Commerce.

The idea, then, behind Cashin’s warning is that if Yellen emphasises that the Fed believes the subpar economic data seen to start this year is a temporary blip, the Fed could still be on track to raise rates later this year, a possibility many in the market have started to discount of late.

Early on Friday, the US dollar was rallying, but equity markets were little changed.

We’ll have complete coverage of Yellen’s speech, and market reaction, later this afternoon.

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