The stronger U.S. dollar has been weighing on major U.S.-based companies’ top and bottom lines for some time, and this is expected to continue. In fact, S&P 500 companies with a high level of global exposure stand to see their earnings growth slow during the third quarter. Third quarter earnings season kicks off less than a month from now.

The Fed talks global economics

When the U.S. Federal Reserve met on Thursday, all eyes were watching to see if they would raise interest rates. They didn’t, in light of the economic turmoil that’s gripping the globe. The Fed did, however, talk about the global economic pressures and said those pressures are likely to pressure inflation and could “restrain economic activity.”

The FOMC also said it is monitoring the global economic developments and sees risks to the U.S. labor market as well.

S&P 500 earnings to be hit by U.S. dollar again

In the last quarter, analysts had been hoping that some of the pressure from the strengthening of the U.S. dollar versus foreign currencies would abate because the dollar had weakened slightly from previous quarters. However, the carnage continued, and U.S. companies continued to see their earnings and sales tumble as a result of the strong currency.

FactSet analysts said today that S&P 500 companies with higher levels of global exposure will likely report weaker sales and earnings growth compared to companies that don’t have as much global exposure. Using their FactSet Geographic Revenue Exposure data, they analyzed the amount of global exposure for all companies in the index.

They divided the S&P 500 into two groups those with more than half their sales outside the U.S. and those with more than half their sales inside the U.S. They then calculated aggregate revenue and earnings growth for both groups.

S&P 500 earnings expected to fall

According to FactSet, the S&P 500 is expected to see a 4.4% decline in earnings for the third quarter overall. For companies with more than half of their sales coming domestically, the firm estimates a 3.1% growth rate for earnings. For companies in the index with more than half their sales coming internationally, earnings are expected to decline 14.1%.