This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Resurgent Dollar Could Hurt S&P 500 Earnings

By STEVE ROTHWELL

NEW YORK (AP) â¿¿ The dollar is rising again.

After a drop last autumn, the U.S. dollar has climbed 5 percent against other currencies over the past two months, reaching the highest level since August.

The main reason is the U.S. economy. Although growth is still weak, the outlook for the U.S. is better than elsewhere in the developed world. Europe is stuck in a recession and struggling to control its debt. Japan is trying to push down the value of the yen to boost exports and end deflation.

A strong dollar helps Americans by making imports cheaper and keeping inflation low, but it can hurt U.S. companies two ways. Their goods become more expensive for overseas customers, and the profits on sales abroad are worth less when converted from a foreign currency to dollars.

The impact of the dollar's appreciation is starting to show up in earnings reports. The insurer Aflac, which does much of its business in Japan, says its earnings were hurt as the yen fell against the U.S. currency. Procter & Gamble, which makes Gillette razors and Crest toothpaste, said the stronger dollar was holding back its sales growth overseas.

Many analysts predict that the dollar will continue to rise. Here's a look at what a stronger dollar means for investors.

TOUGH FOR TECHNOLOGY COMPANIES AND MATERIALS MAKERS

A rising dollar could spell trouble for U.S. companies that make software and consumer products, as well as companies that make basic materials like aluminum.

The tech industry relies heavily on foreign sales for growth. About 56 percent of its revenue comes from outside the U.S., according to research by RBC Capital Markets. As the dollar strengthens, U.S. goods become more expensive overseas, discouraging buyers.

Investors worry that could slow business â¿¿ and profits. As a result, technology companies are tied with materials makers as the worst industry in the S&P 500 this year, rising just 4.2 percent, compared with 10 percent for the overall market. Business software giant Oracle said in its most recent earnings report, on March 20, that the rising dollar lowered its earnings by about two percent.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs