Foreign demand, powered by chips, recovering despite strong dollar
Dow up ~1%, S&P 500 modestly green, Nasdaq dips
Energy leads S&P 500 sector gainers; Tech weakest group
Euro STOXX 600 index up ~0.9%
Dollar off; gold, crude up; bitcoin down ~4%
U.S. 10-Year Treasury yield edges up to ~4.27%
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FOREIGN DEMAND, POWERED BY CHIPS, RECOVERING DESPITE STRONG DOLLAR
Demand in the United States, powered by the intrepid consumer, has been more resilient than our overseas counterparts in these years of post-pandemic recovery.
But Goldman Sachs sees a shift in this dynamic.
In a note by the broker's research team led by David Kostin, chief U.S. equity analyst, companies with greater exposure to international sales have bested the year-to-date performance of companies leaning more on domestic sales to the tune of five percentage points.
This, despite a fairly robust greenback.
Follow the chips, Kostin tells us.
Semiconductors account for 22% of the weight in Goldman's international sales basket.
"The surge in Semiconductor stocks partly explains the divergence between the relative performance," Kostin writes, adding that "Semiconductors have returned 79% YTD and is the best performing S&P 500 industry group."
Chips aside, Goldman Sachs' global economic forecast for this year and next calls for a deceleration in U.S. economic growth, while non-U.S. growth accelerates.
The resulting narrowing differential could "represent a headwind for the U.S. dollar and domestic-facing stocks," the note says.
There's also a the matter of the upcoming U.S. presidential election, which in the case of a Republican White House, is likely to result in a stronger dollar and round two of the Trump tariff war.
"Tariffs would create a headwind to the performance of stocks with high international revenue exposure due to the risk of retaliatory tariffs as well as heightened geopolitical tensions," Kostin says.
They would also, Kostin points out, put upward pressure on consumer prices.
The chart below, courtesy of Goldman Sachs, shows relative performance of companies with domestic vs foreign facing sales, along with the trade-weighted dollar:
(Stephen Culp)
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FOR MONDAY'S EARLIER LIVE MARKET POSTS:
U.S. INDEXES GAIN, BUT TECH, CHIPS DRAG - CLICK HERE
MARKET FOCUS SHIFTING TO GROWTH FROM INFLATION - CLICK HERE
S&P 500 INDEX: HITTING A WALL? - CLICK HERE
TWITCHY FX TRADERS ARE BACK ON YEN WATCH - CLICK HERE
GOOD ENTRY POINT TO BUY EU EQUITIES IN H2? - CLICK HERE
BARCLAYS MODEL POINTS TO MONTH-END DOLLAR SELLING - CLICK HERE
AU REVOIR, FRENCH EXPECTIONALISM - CLICK HERE
DRIVE TIME - CLICK HERE
CAUTIOUSLY HIGHER - CLICK HERE
ON ALERT FOR YEN INTERVENTION, US INFLATION - CLICK HERE
International vs domestic sales vs dollar https://reut.rs/3VBowcA
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