The U.S. dollar index fell more than 1 percent overnight to below 99, its lowest since Nov. 11. A weaker dollar increases the U.S. value of overseas earnings for companies — such as those in technology — that generate a significant part of their revenue from foreign countries.
The euro is now up more than 3 percent against the greenback since the beginning of the year.
The last 11 times the euro gained more than 3 percent against the dollar over six months, technology and consumer discretionary had an average return of at least 5 percent, according to Kensho, a quantitative analytics tool used by hedge funds.
Some of the top individual stock performers over that time included:
- Priceline.com, which generates 80.3 percent of revenue from overseas, according to Bespoke Investment Group.
- Mastercard — 61 percent of overseas revenue.
- Skyworks Solutions — 97.9 percent of overseas revenue.
- Broadcom — 88.9 percent of overseas revenue.
- Wynn Resorts — 60.4 percent of overseas revenue.
In the Monday note, Jefferies upgraded its view on the technology sector to “modestly bullish,” noting that about 58 percent of tech stocks’ sales come from overseas.
“A weaker U.S. dollar and sales rebounding from a low base in Europe and emerging markets will likely underwrite overseas profits for FY17,” Darby said.
Tech has the greatest weighting in the S&P 500 and is the top performer in the index so far this year.
Other investment firms are betting on a weaker dollar against the euro as well. Last week, Goldman Sachs closed two of its long U.S. dollar trades, including one against the euro.
“The outlook for U.S. firms with the highest domestic sales exposure is less favorable than we had expected postelection,” Goldman’s chief U.S. equity strategist, David Kostin, said in a Friday note.
— CNBC’s John Melloy contributed to this report.
Disclosure: CNBC’s parent NBCUniversal is a minority investor in Kensho.