Cheap oil and strong dollar press S&P 500 to first profit decline in 5 years

Plunging oil prices and a stronger dollar are pushing down U.S. corporate profits for the first time since 2009.

First-quarter earnings per share for companies in the Standard & Poor’s 500 Index may have fallen about 5.8 percent, according to Bloomberg estimates.

Oil prices have tumbled by about half from 2014 as companies pumped their way into a global glut, and the dollar’s climb of about 25 percent against its currency peers since last summer has chipped away at revenue for companies such as United Technologies Corp.

The effects ripple across industries. U.S. Steel Corp. last month announced plans to shut an Illinois mill partly on falling demand from the energy companies. The dollar’s surge helped make steel imports cheaper, hurting producers such as Nucor Corp. At Dow Chemical Co., profit is poised to drop as plastics prices decline with oil and farmers buy fewer chemicals because their crops are selling for less.

On Friday the US Labor Department reported that employers added 126,000 jobs in March, the fewest since December 2013, and the S&P 500 fell 0.3 percent at 9:38 a.m. Monday in New York - the first trading day after the report.

If energy companies are not taken into account, S&P earnings look a bit better, with a potential rise of 1.9 percent.

Alcoa is poised to report a higher profit in part because of rising aluminum demand from automakers and airlines - two industries that are both benefiting from lower oil prices. According to estimates, profits at auto manufacturers and their suppliers may jump 42 percent.

Wal-Mart can partially counter the negative effects of foreign exchange and the inventory shortages caused by the West Coast port strike, by means of low gasoline prices, which tend to correspond with higher consumer spending.

Exxon, the world’s biggest energy producer by market value, is projected to post its worst quarterly profit performance in 12 years, based on analysts’ average estimate.

Transocean Ltd., which commands rents of $400,000 a day for its ocean-going rigs, may report earnings of about 57 cents a share, a drop of about 60 percent from the year-earlier period, the estimates show.

“This could go on for a very long time because there’s little reason to think oil prices are going to recover any time soon,” said Sutherland, who as founder of the Traverse City, Michigan-based firm has cut the energy portion of his $700 million portfolio to 1 percent from about 7 percent a year ago.

Apple Inc. stores represent a place where consumers definitely were willing to open their wallets. Earnings are predicted to jump about 28 percent to $2.13 a share for the maker of iPhones. That’s part of the broader information-technology industry where profits may rise 3.9 percent.

Health care, where results are driven by yearslong drug pipelines and strategic acquisitions, is another group less susceptible to energy prices. The industry’s first-quarter earnings may rise 7.3 percent.