Steve Mnuchin is learning what it's like to be Janet Yellen

Michael Nagle | Bloomberg | Getty Images

Stocks have modestly turned around after a rocky morning session Thursday.

The president held a meeting with a number of industrial CEOs late in the morning. Dow Chemical CEO Andrew Liveris summed up the tone: "All the CEOs that were here today and in the last meeting are very encouraged by the pro-business policies of President Trumpand his cabinet."

Still, it's the Mnuchin interview with CNBC's Becky Quick this morning that had the markets buzzing all morning.

Treasury Secretary Steve Mnuchin is now learning what it's like to be Federal Reserve Chair Janet Yellen. By that, I mean the Treasury secretary is learning how virtually every syllable out of his mouth is being parsed and traded upon, regardless of whether what the market believes he is saying is what he actually meant to say.

After the interview, the dollar weakened, bond yields moved down, and while the S&P opened at a new high it quickly gave up all its gains and moved into negative territory. Most importantly, the banks were among the weakest sectors.

What happened? Traders chose to focus on Mnuchin's comment that he wanted tax reform to pass by the August recess, which many doubt can happen. There seems to be a sense that reforms will take longer than many anticipated, after Mnuchin said growth would come "towards the end of next year," a time period likely further out than traders anticipated.

More importantly, they chose to focus on what appears to be the order of the priorities in this comment: "It's going to be focused on middle-income tax cuts, simplification, and making the business tax competitive with the rest of the world."

There's nothing extraordinary in this statement, but traders interpreted this to mean that a middle-income tax cut might be even more important than a big corporate tax break. The concern is that the corporate tax break may not be as great as anticipated. Since this has been big fuel for the market, stocks and particularly banks have been struggling since the open.

Perhaps more significant is Mnuchin's acknowledgment that the stock market rally has been a report card on the Trump administration: "This is a mark-to-market business and you see what the market thinks."

This is an extraordinary claim for a Treasury secretary. Mnuchin's predecessors have historically been neutral on markets, particularly on things as sensitive as stocks and the dollar.

It is also a very dangerous game since if you live by the stock market, you die by the stock market.

By this measure, Mnuchin should be praising Barack Obama, considering the S&P 500 moved up nearly 200 percent during his time in office. Or perhaps he should be praising Janet Yellen and Ben Bernanke, who are also given much of the credit for the rally.

CNBC

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