All ahead full on QE2! … erm… QE2!

Also note that a weak dollar / strong yuan could hurt Apple profit margins on iPhones, iPads, and iPods. Apple is about 20% of the Nasdaq 100 (for comparison, Microsoft is less than 5%). One company could make a huge difference in the stock market.

Large cap companies in the US are complex beasts. It isn’t a sure thing that a weaker dollar will help them. It isn’t a sure thing that a weaker dollar will add many jobs. We pretend it helps manufacturers, but that’s far from certain when US manufacturing companies have facilities overseas.

On the other hand, the service sector is quite large in the US. Services can be exported and are probably more price sensitive than manufactured products. There is evidence that a weaker dollar helps there. The September 2010 Non-Manufacturing ISM Report on Business, the report I try to make a point not to dedicate a whole post to, indicated a rather significant positive change in exports. The New Export Orders index grew to 58, up from 46.5 in August. That’s a huge swing. These are the non-manufacturing industries likely helped by a weaker dollar:

The six industries reporting an increase in new export orders in September — listed in order — are: Professional, Scientific & Technical Services; Information; Retail Trade; Other Services; Accommodation & Food Services; and Finance & Insurance. The two industries reporting a decrease in export orders in September are: Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.

Of course, if a currency devaluation race evolves quickly into a trade war (which seems to already be the case with China), many of these gains will be erased independent of the direction of the dollar.