×

Morning Note: Weak USD Good for USA?

Is a weaker dollar good for the U.S. economy?

That was a question for Fast Money traders Thursday morning as the dollar index continued to hit fresh three-year lows following the Fed’s decision to keep rates low for an extended period.

“The dollar is under assault,” wrote Dennis Gartman in The Gartman Letter. “There really is no other way to explain it.”

But while the dollar was falling from the combination of Fed monetary policy and weaker-than-expected GDP data, the stock market was near flat Thursday as traders weighed the implications the declining currency for corporate earnings. The Commerce Department said today that GDP growth slowed to 1.8% in the first quarter. The decline followed yesterday’s cut to full year GDP estimates by the Fed from 3.4% to 3.9% to 3.1% to 3.3%.

On one hand, a weaker dollar is good for major U.S. exporters, materials companies, and energy firms. Because commodities are priced in dollars, the weak dollar tends to lead to higher commodity prices and higher earnings in dollar terms for the likes of Exxon Mobile, Freeport-McMoRan and Alcoa.

However, to the extent that the dollar is weak because of poor U.S. economic growth, a weak dollar is a bad signal for stocks – particularly companies highly leveraged to U.S. household consumption.

Brian Sozzi, a retail analyst at Wall Street Strategies, is expecting retail stocks to weaken in the back half of the year due to commodity-driven consumer spending declines.

“The consumer will be hit with price increases from all angles,” said Sozzi in a telephone conversation. “There is a good chance that gasoline prices will average $4 a gallon and companies are raising prices. A $900 freezer at Home Depot may soon be $970. Maybe that stops the consumer from buying.”



______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.


Trader disclosure: On April 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian Owns (AAPL); Najarian Owns (AKAM); Najarian owns (C); Najarian owns (CVS); Najarian own (MSFT); Najarian owns (VLO); Najarian owns (XLF); Terranova owns ( TCK); Terranova owns (SLV); Terranova owns (NFLX); Terranova owns (APA); Terranova owns (OXY); Terranova owns (FCX); Terranova owns (BAX); Terranova owns (IBM); Terranova owns (HOC); Terranova owns (UPL); Terranova owns (AKAM); Terranova owns (V); Terranova owns (CVI); Terranova owns (BX); Weiss owns (DE); Weiss owns (DE) puts; Weiss owns (AKAM); Weiss owns (QCOM); Weiss owns (VZ); Weiss owns (MSFT); Weiss owns (UUP); Weiss owns (DZZ); Weiss owns (TBT); Weiss owns (GDX); Weiss owns (JPM); Weiss owns (COP); Weiss owns (DVN)

For Matt Hougan
Howgan owns (ZSL)

For Joe Terranova
Terranova is long (AAPL) April 350 puts
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (DOM)

For Les Funtleyder
Miller Tabak + Co., LLC is a registered market maker in the following securities: No companies mentioned in this report. The analyst does not have equity positions in any of the stocks mentioned. No individual at Miller Tabak + Co., LLC holds a position on the board of directors of a covered company, nor does an individual at a covered company do so at Miller Tabak + Co., LLC. Miller Tabak + Co., LLC does not own one percent or more of the outstanding shares of the company discussed in this report.




CNBC.com with wires.