The strong dollar has overwhelmed many tech giants. Not only did Microsoft cut its second-quarter sales and earnings guidance, but many large U.S. companies such as Apple, Nvidia, Tesla and Amazon were adversely affected by foreign exchange fluctuations.

In the past May, the U.S. dollar index, which tracks the U.S. dollar against a basket of other currencies, rose strongly, breaking above 105 at one point. Not only did it record the largest monthly gain in a year, but it also refreshed the high since December 2002 more than once.

Why does the dollar appreciate? What’s the impact?

As the US economy recovers, the employment situation improves and inflation continues to rise, the market’s expectations for the Fed’s withdrawal from the loose monetary policy are rising, and the dollar’s hedging function is prominent.

In addition, the Russian-Ukrainian conflict has disrupted markets, hitting supplies of key commodities and pushing up energy prices. Overall, risk aversion in the market has increased, and the dollar has continued to strengthen.

The U.S. dollar index is up about 13 percent since the start of the year. On the upside, a stronger dollar is good for U.S. consumers , making imported goods and services cheaper.

On the other hand, a stronger dollar means foreigners will have to spend more to buy American products, which will reduce U.S. exports and hurt the U.S. tourism industry and the international sales of American businesses .

Strong U.S. dollar weighs on outlook, big U.S. companies are on pins and needles

The stock prices of large U.S. companies with substantial overseas revenue streams have taken a hit recently.

The S&P 500 foreign income exposure index is down about 17% so far this year, compared with a 13% decline for the S&P 500 over the same period.

Wall Street News’s previous article mentioned that before the US stock market on June 2, local time, Microsoft issued a warning that revenue in the second quarter would be reduced by $460 million due to “the impact of foreign exchange caused by the strengthening of the U.S. dollar”, and profit guidance will also be lower than analysts’ expectations. .

As a large multinational company, Microsoft has a high proportion of international business, which means that a stronger dollar will certainly drag down the company’s business to some extent.

In addition to Microsoft, a number of American technology giants such as Apple, Nvidia, Tesla, Amazon, Google parent company Alphabet and Facebook parent company Meta are “on pins and needles.”

Meanwhile, credit card company Mastercard and Deere, a maker of agricultural and construction equipment with large export markets, also said they were “deeply hurt” by a strong dollar weighing on the outlook.

In addition, large pharmaceutical companies Johnson & Johnson and AbbVie, which sell drugs internationally, also pointed out that foreign exchange effects will drag on sales for the whole of this year.

This article is reprinted from: https://news.futunn.com/post/16170273?src=3&report_type=market&report_id=207280&futusource=news_headline_list
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