(Bloomberg) -- Nothing, seemingly, can stop the upward march of earnings that's underpinning the latest leg of the stock market rally. But if anything could halt the climb, it's the dollar.
The greenback's biggest decline in more than a decade has helped bolster profits at multinational companies like Apple Inc. and Microsoft Corp. It's one reason why stocks with high foreign sales currently are beating analyst estimates 57 percent of the time, while those with purely domestic revenue are doing it only 23 percent of the time, data compiled by Bank of America show.
But investors should beware of that benefit dissipating as the dollar reverses course. After bottoming in September, it has strengthened 4 percent against a basket of currencies. According to estimates by Goldman Sachs Group Inc., every 10 percent shift in the dollar affects S&P 500 Index earnings per share by $3.
Even with the recent jump, the average level of the Bloomberg Dollar Spot Index since the start of the quarter is down 4.9 percent from a year ago. So it's not quite time to panic over the currency's appreciation. But a continued strengthening may take away one of the key drivers of corporate earning strength.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.
To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Eric J. Weiner, Dave Liedtka
©2017 Bloomberg L.P.
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