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Markets vulnerable to tight financial conditions: Pro

Good news may still be bad newsat least for the first few months of 2014, according to Barclays' Barry Knapp.

Knapp, the head of U.S. equities at Barclays Capital, told CNBC on Thursday that markets are vulnerable to the Federal Reserve's looming interest rate hikes, adding that subsequent financial tightening and limited borrowing could affect equities.

While the Fed isn't expected to raise rates until 2015, a better-than-expected December employment report Friday could raise concerns about the pace of rate hikes, Knapp said.

Though such concerns wouldn't disrupt long-term economic recovery, he said, the first half of 2014 could be difficult if lending slowed.

"We think the market is vulnerable to a pullback related to tighter financial conditionsa long-winded way of saying good is going to be bad tomorrow," Knapp said on "Squawk on the Street."

(Read more: US claims slide as expectations brighten)

Floor of the New York Stock Exchange.Getty Images

Data released by ADP on Wednesday suggested the December employment report released Friday may surprise on the upside. The private sector generated about 238,000 positions in December, the best month in 2013, according to the payroll services provider. That's a strong indicator to economists of what Friday's employment report holds.

(Read more: Private job creation is 'off and running': ADP)

"It was better than expected," Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said on "Squawk on the Street," referring to the ADP report. "Most of the economic data the past month has been even better than what I thought. It would seem to be stronger employment would be consistent with that."


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