Forbes/Sergei Klebnikov
Dow Falls Over 500 Points As Tech Stocks Drag Market Lower

The market fell sharply on Wednesday, adding to its sell-off so far in September as tech stocks again came under pressure and investors remained wary about a resurgence in coronavirus cases.

The Dow Jones Industrial Average closed down 1.9%, or 525 points, on Wednesday, while the S&P 500 fell 2.4% and the tech-heavy Nasdaq Composite dropped 3.0%.

Shares of Big Tech stocks, which have been the source of the sell-off in recent weeks, again dragged the market lower: Apple, Amazon, Microsoft, Netflix and Google-parent Alphabet all fell around 3% or more.

Tesla stock plunged over 9% after the company’s highly anticipated ‘Battery Day’, in which CEO Elon Musk detailed a new battery design that he says will make Tesla’s cars cheaper to produce.

On the stimulus front, negotiations remain in a stalemate as lawmakers on both sides struggle to agree on the size and provisions of the next coronavirus relief package.

Federal Reserve Chairman Jerome Powell told Congress on Wednesday that further fiscal stimulus would be crucial if the U.S. economic recovery is to continue, saying that there’s still “a long way to go.”

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CNN Business/Julia Horowitz
This data is ringing ‘alarm bells’ about the recovery

A closely-watched gauge of economic health is flashing a warning in Europe, indicating that the budding economic recovery is running into trouble.

What’s happening: The latest reading of the composite Purchasing Managers’ Index for Europe from IHS Markit, which tracks the manufacturing and services sectors, came in at 50.1 for September, a three-month low.

While manufacturing activity shot up, the services sector began contracting again as concerns about Covid-19 cases intensified.

Chris Williamson, chief business economist at IHS Markit, said the data indicates that the recovery “stalled” this month, and warned of “a two-speed economy,” with manufacturing and services heading in opposite directions.

Other economists also expressed concern. The data, they said, clearly showed the impact of the rise in infections and fresh government restrictions.

“Alarm bells should be going off about the pace of the recovery at the moment as the number of new Covid-19 cases has been flaring up again,” Bert Colijn of ING said in a note to clients. “While new measures against the virus have remained local and mild compared to March, it looks as though the economy is already feeling the effects of the increase in cases.”

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Kitco/Neils Christensen
Gold price is not out of line with fair value, lots of upside potential – Charlie Morris

The gold market is seeing some significant selling pressure as it breaks below critical psychological support at $1,900 an ounce; however, one fund manager said that prices are still holding a healthy premium above fair value.

In an interview with Kitco News, on the sidelines of the Denver Gold Forum, Charlie Morris, chief investment officer at ByteTree Asset Management, said that he currently sees gold’s fair value around $1,600 an ounce.

He explained that when gold prices were hovering around $1,900 an ounce, the market was trading with about a 15% premium. He added that valuations are in line with the fundamental factors driving the precious metal. There is still plenty of upside potential, he said.

“There’s a little bit of a speculative premium on top of 15% is not a big deal. 50% would be, would be pretty extreme,” he said. “I think that we’re slightly ahead of ourselves in the gold, in the gold market, but quite rightly so because the fundamentals and the narrative are so strong at the moment.”

In May, in a commentary written for the London Bullion Market Association, Morris made a case for gold to push to $7,000 an ounce by the next decade. He said that he hasn’t seen anything in the last few months to change his long-term price target.

He added that low interest rates, coupled with rising inflation pressures, will continue to push gold prices higher.

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CNBC/Stephanie Landsman
Economist Stephen Roach issues new dollar crash warning, sees double-dip recession odds above 50%

Economist Stephen Roach warns next year will be brutal for the dollar.

Not only does he see growing odds of a double-dip recession, the Yale University senior fellow believes his “seemingly crazed idea” that the dollar would crash shouldn’t be so crazy anymore.

“We’ve got data that’s confirmed both the saving and current account dynamic in a much more dramatic fashion than even I was looking for,” Roach told CNBC’s “Trading Nation” on Wednesday.

Roach highlights two ominous second quarter figures.

“The current account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration in the second quarter,” he said. “The so-called net-national savings rate, which is the sum of savings of individuals, businesses and the government sector, also recorded a record decline in the second quarter going back into negative territory for the first time since the global financial crisis.”

Right now, the U.S. Dollar Index is trading around 94. When Roach predicted on “Trading Nation” last June the index would plunge 35%, it was trading around 96.

At the time, Roach estimated it would happen in the next year or two, maybe more. But now, he sees it happening by the end of 2021.

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