The Sleepy Dow

Yesterday was a pretty quiet day on Wall Street, with the Dow Jones industrial average rising by a barely perceptible 0.07 percent. That came after a 0.14 percent increase on Monday and a 0.11 percent increase on Friday. It's hard to get much sleepier than that.

The Dow hadn't had three straight days of increases of less than 0.2 percent in a year and a half, since the week of Thanksgiving 2013. During the three days before Turkey Day, the Dow was even quieter, rising 0.05 percent, 0.002 percent, and 0.15 percent, but that week is generally a low-volume time of the year for the markets.

Looking back to last week, the Dow was up a more robust 1.1 percent on Thursday. Believe it or not, this marks the first four-day winning streak for the Dow since way back in February. 

A Good News/Bad News Earnings Season

As we're grinding to the end of this quarter's earnings season, the results are kind of mixed. With reports in from 92 percent of the companies in the S&P 500, earnings per share are up just 2.1 percent from a year earlier. Even more troubling is that analyst forecasts show S&P earnings rising just 1.4 percent for the full year, which would be the worst year since the recession ended in 2009.

But the markets don't seem exceptionally nervous; the S&P 500 closed at another new record just this past Friday. One big reason for optimism is that the two primary problems affecting first-quarter earnings, low oil prices and the high dollar, have reversed course so far in the second quarter.

Crude-oil futures are up 37 percent from their 2015 low; that might not be so good for drivers, but it's great news for energy stocks. The dollar has fallen 8 percent against the euro from its March high, which is great news for exporters. All told, we might see earnings bounce back some in the second quarter.

Jet-Propelled Savings

The fluctuations in oil prices continue to have repercussions in far corners of the economy. Here's another one: Airlines are spending a lot less on jet fuel than they did a year ago. Southwest Airlines reports that it spent an average of $2 per gallon of jet fuel in the first quarter of 2015 - down from $3.08 per gallon in the first quarter of 2014.

What's happening to all those savings? They're going to shareholders. Southwest announced last week it was buying back $1.5 billion of its own stock and increasing its dividend. Delta Air Lines also announced it was planning to buy back a whopping $5 billion in stock.

Altogether, the airlines are projected to reap a $7 billion windfall in lower fuel costs over the first six months of this year. Credit Suisse expects about 70 percent of that to find its way back to shareholders.

Dark Clouds in the Economy

There was a troubling sign for the economy in figures released yesterday: Retail sales were virtually flat in April, with no growth shown. Households appear to be paying down debt and building up bank accounts rather than making retail purchases. The nation’s personal saving rate in the first quarter of the year was the highest since the end of 2012.


Given that April is the first month of the second quarter, that report had reverberations. J.P. Morgan Chase economists lowered their second-quarter estimate to 2 percent growth from its earlier 2.5 percent after the retail figures were released. Morgan Stanley's second quarter estimate for GDP growth is just 1.5 percent.

Compounding the issue is the fact that first quarter GDP, first estimated at 0.2 percent, is now expected to drop with additional data that has been released. In fact, it seems likely that the economy contracted in the first quarter. The Commerce Department releases its next estimate of first quarter GDP on May 29.

The Top-Paying College Majors

If you have a child graduating from college this spring, you may be wondering how they're going to pay back all those student loans. Here's the latest list of the most lucrative majors in terms of starting salary,  based on data collected by PayScale.com from 1,000 U.S. universities:

1.  Petroleum Engineering Starting salary: $102,300
2.  Chemical Engineering Starting salary: $69,600
3.  Computer Engineering Starting salary: $67,300
4.  Nuclear Engineering Starting salary: $67,000
5.  Computer Science &  Engineering Starting salary: $66,700
6.  Electrical & Computer Engineering Starting salary: $66,500
7.  Electrical Engineering Starting salary: $65,900
8.  Aerospace Engineering Starting salary: $64,700
9.  Electronics & Communications Engineering Starting salary: $64,100
10.  Materials Science & Engineering Starting salary: $64,000

Small Business Is Spending Again

Despite some hiccups in the larger economy, small business owners are growing increasingly positive about the future. The National Federation of Independent Business said on Tuesday that its Small Business Optimism Index rose 1.7 points in April, the index's largest gain since December.

Perhaps even more positive was the fact that these business are spending money.  Of the 1,500 firms surveyed, 60 percent reported capital outlays, a post-recession high. Of those making expenditures, 44 percent said they had bought new equipment, and 26 percent planned capital outlays in the next three to six months.

Nine of the 10 components in the NFIB index rose last month. The only one that didn't is a bit of a surprise, considering all the optimism: Sales showed the only decline.

Beating the Earnings Recession

A month ago, we talked about the possibility of an earnings recession, in which the aggregate earnings for the S&P 500 would have fallen for an entire calendar year. Now that possibility looks a bit more remote. According to FactSet, earnings growth for the first quarter of this year looks like it will come in positive, although just barely, at growth of 0.1 percent.

Earnings growth now looks positive for the first time since January. The reason is that companies are reporting earnings above the analysts' estimates for the first quarter at a lofty 6.4 percent, much higher than expected.

The five-year average  for beating earnings is 5.4 percent. If that 6.4 percent earnings-beating figure holds up for the entirety of the first quarter, it will mark the highest surprise percentage for a quarter since the first quarter of 2011, when it was an even 7.0 percent.