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Traders work on the floor of the New York Stock Exchange during the afternoon of January 27, 2015 in New York City. The Dow Jones Industrial Average plunged over 350 points this morning before closing out approximately 290 points down due to a poor earnings report.Andrew Burton/Getty Images

The surging U.S. dollar is inflicting damage on some of the world's biggest multinationals, sending the Dow to a triple-digit loss and raising fresh doubts about the momentum of sales growth for the year ahead.

The Dow Jones industrial average fell 291.5 points, or 1.65 per cent, to 17,387.21, as investors reacted to a slew of disappointing fourth-quarter earnings results from stocks that make up the index.

An unexpected drop in orders for U.S. durable goods also rattled market players, who are counting on growth in the American economy to offset some of the weakness being seen abroad.

Prior to this earnings season, analysts cautioned that multinationals' foreign sales would come under pressure due to the U.S. dollar's rise.

But the magnitude of this headwind is only now becoming apparent.

Microsoft Corp. was one of the leading decliners on the Dow, dropping 9.3 per cent, as traders reacted to news late Monday that the main engine of its historic earnings power – selling Windows and Office to big businesses – showed signs of waning. In a conference call, Microsoft chief financial officer Amy Hood said that the firm's earnings in the coming quarter would take a 4-per-cent hit because of unfavourable foreign exchange movements.

Meanwhile, A.G. Lafley, chief executive of Procter & Gamble Co., referenced "unprecedented currency devaluations" to explain its disappointing fourth-quarter results on Tuesday morning. Shares of the company fell 3.4 per cent.

Heavy machinery maker Caterpillar Inc. cut its profit outlook for 2015 and warned the plunge in oil prices would hurt its energy equipment business, sending its shares tumbling 7.1 per cent. Management said it expects global growth to pick up only modestly in 2015, and its outlook on Chinese demand has dimmed.

Other firms that cited a currency headwind on Tuesday included Pfizer Inc., Bristol-Myers Squibb Co., and E.I. du Pont de Nemours & Co.

All firms generate a larger portion of their revenues overseas than most U.S. large-cap equities, and are among the most acutely affected by the buoyant greenback.

On the economic front, traders had to grapple with the poor durable-goods orders report for the month of December. The 3.4-per-cent monthly decline for total orders could be brushed aside due to the volatility of the headline figure.

However, a surprising 0.6-per-cent decrease in orders excluding the defence and transportation segments was more difficult to ignore, as it suggests the world's supposed growth engine may not have entered 2015 with as much momentum as hoped.

The U.S. dollar failed to gain further upward traction on Tuesday, however, amid speculation that the Federal Reserve might hold off on raising interest rates for longer than expected. The U.S. central bank is due to release a policy statement on Wednesday after a two-day policy meeting.

In its previous statement, published on Dec. 17, U.S. monetary policy-makers provided reassurance that they would be "patient" before beginning to tighten policy, and that it continued to be appropriate to maintain current levels of stimulus for a "considerable period."

Though Fed Chair Janet Yellen has indicated she plans to act as a steward for the U.S. economy rather than cater to the wishes of the equity market, many market players remain optimistic that the end of near-zero interest rates policy is not coming any time soon.

"A rate hike as early as the Fed's mid-2015 guidance looks increasingly implausible," wrote Morgan Stanley economist Ellen Zentner, who believes the central bank will stand pat on rates until March, 2016.

Canadian equities managed to advance while U.S. stocks faltered, with the S&P/TSX composite index rising 36.05 points, or 0.24 per cent, at 14,833.88, in part due to a rise in gold miners and energy stocks.

The weaker loonie relative to the greenback will help cushion the blow of falling commodity prices for companies in the natural resources sector, and may help firms boost their sales to the United States.

However, National Bank senior economist Krishen Rangasamy notes that the good times for Canadian equities may be short-lived, as the "Great White Short" trade is now back in vogue.

"Unlike the past couple of years when those shorting Canada did so based on a hunch that there was an 'imminent' housing collapse (which never really materialized), the current case against Canada is arguably more compelling after the commodity price collapse," he wrote.