Wells Capital Management's Paulsen Talks About Current Market Action

James Paulsen of Wells Capital Management says the market sell-off on Thursday was because "good news on Main Street is no longer good news, necessarily, for Wall Street."

Speaking during an interview on CNBC, Paulsen said he believes we have now crossed the line where conditions are becoming too hot for both bond and stock investors.

That came to light, he said, on Wednesday -- with the GDP numbers and, in particular, the hot inflation numbers -- and on Thursday with claim numbers.

Paulsen expects Friday will be an interesting day, as the goverment reports its July unemployment data.

He thinks that if the unemployment rate drops below its current 6.1 percent, "into the fives", Wall Street will interpret that as a sign the Fed will have to speed up its exit strategy.

People will start calling for interest rates hikes by year's end, he added. He also thinks it doesn't matter when the Fed steps in, because free market is already showing higher yields and that has historically been negative for the stock market.