Dollar Upside Threatens Earnings Numbers

There's little in the cards that would signal a sustained rebound in the euro amid revived expectations that the Federal Reserve will continue raising rates here while the European Central Bank is increasingly signaling that rates may have to come down.

For Sanford C. Bernstein & Co. chief investment strategist Vadim Zlotnikov, the trend especially warrants caution in all U.S. companies that have a significant European exposure, and especially those that are consumer-related, as they could experience a double-whammy of lesser growth and negative currency effects.

U.S. tobacco companies, with 41% of their sales derived from Europe as of October 2004, head the list of the most exposure. Altria (MO), for one, drew 43.6% of its sales from Europe last year.

Next on the black list are the office electronics and computer peripherals groups, both of which derived 30% of their overall sales from Europe last year.

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