Is there more room for the US dollar to fall? Five US stocks will benefit, including Nvidia!

The US dollar has been depreciating, but this is good news for the stock market and many companies that generate a large portion of their sales overseas.

The US dollar has more room to fall

Bond yields have fallen as inflation cools. The fixed-income market seems to anticipate that the Fed will stop raising interest rates as early as this summer as the economy slows.

The rebound in the stock market also indicates that investors' concerns have diminished, reducing demand for the US dollar as a safe haven.

The US dollar index is currently approaching 100, a key support level where bulls have entered multiple times in the past year.

John Kolovos, Chief Technical Strategist at Macro Risk Advisors, said that if these bulls do not appear this time, the US dollar may lose support and could fall to around $95.

Good news for US stocks

A weaker US dollar means that US-based companies' overseas sales will convert into more US dollars when exchanged back into the currency.

Considering that 60% of the S&P 500's revenue comes from overseas, this will be a positive for US corporate profits.

In fact, Dow Jones market data shows that since 1985, when the US dollar index falls, the S&P 500 index has risen an average of 1.3%, while when the US dollar index rises, the index only rises 0.2%.

Caterpillar, Nvidia, and Micron Technology all generate at least half of their sales from overseas. As the US dollar depreciates, the stock prices of these three companies have been rising.

Since the US dollar peaked, Caterpillar's stock price has risen by more than 35%, Nvidia's stock price has doubled, and Micron Technology has risen by about 20%, all outperforming the S&P 500 index.

Four US stocks benefiting from the US dollar's decline

The US dollar is not the only reason for the stock market's rise.

For example, Nvidia has benefited from the rise of ChatGPT, as artificial intelligence requires more computing power.

Caterpillar, which is sensitive to the economy, may receive a boost from China's reopening.

In addition, Philip Morris International (PM) and Estée Lauder (EL) can be considered, with the former's sales coming entirely from outside the US and the latter's sales accounting for 80%.

During the months when the US dollar depreciated, these stocks had a smaller average increase of only 3%, but their volatility was lower than the overall market because their sales and earnings were much less connected to overall economic demand.

If the US dollar continues to depreciate, they may be the right choice.