Big US Stocks’ Q1’21 Fundamentals

The red-hot US stock markets continue to power inexorably higher, fueling extraordinary complacency and euphoria. With stocks riding an extreme deluge of Fed money printing, selloffs are minor and far between. But are these seemingly perpetual gains to endless lofty record highs justified fundamentally? The big US stocks’ winding-down Q1’21 earnings season illuminates how these elite companies are faring.

The performance of the flagship US S&P 500 stock index (SPX) has been amazing. In the first quarter of 2021, this dominant stock-market benchmark surged 5.8%. During those 61 trading days, the SPX hit new all-time-record closes on fully 15. The SPX stretched as high as 17.0% above its baseline 200-day moving average, extremely overbought territory. Yet traders think the Fed has rendered material selloffs extinct.

Still, in panic mode, that profligate central bank is conjuring up $120b per month out of thin air to monetize bonds! The Fed’s balance sheet, which is a proxy for the total number of US dollars in circulation, surged by 4.4% or $326b in Q1’21 alone. That annualizes to an almost-18% monetary inflation rate. Some of that relentless flood of new fiat dollars from quantitative easing inevitably finds its way into stock markets.

The tidal wave of monetary liquidity sweeping stock prices higher is far larger than that. In March 2020 as stocks plummeted in a lockdown-induced panic, Fed officials were terrified the negative wealth effect would spawn another depression. So they spun up and overclocked their printing presses to truly dizzying speeds. From the ends of Q1’20 to Q1’21, the Fed’s balance sheet skyrocketed 46.3% or $2,435b!

Those extreme monetary inflows are why the S&P 500 soared 53.7% higher in that same span. In the year leading into that stock panic, the Fed’s balance sheet grew a normal 4.6% or $184b. In the year after, it mushroomed a monstrously grotesque 82.5% or $3,431b!It should be no surprise that such a radically unprecedented diluvian torrent of liquidity directly catapulted the US stock markets far higher.

Virtually all traders agree the Fed’s largesse fueled this extraordinary US-stock-market rally. But while bulls think the resulting super-high stock prices are righteous given the US economic recovery, bears are convinced they are an exceedingly dangerous Fed-blown bubble. Four times a year after the quarterly earnings seasons, the rubber meets the road for comparing underlying corporate performances to stock prices.

American companies have 40 days after quarter-ends to report their latest operating and financial results. With 35 of those days passed as of the middle of this week, most of the big US stocks have reported their Q1’21 performances. Every quarter I wade through the latest official 10-Q quarterly reports required by the Securities and Exchange Commission for the 25 largest SPX stocks. They dominate nearly all portfolios.

At the end of March, these giant companies accounted for 40.8% of the weighting of the entire S&P 500! The colossal S&P 500 exchange-traded funds are the biggest in the world. The SPY SPDR S&P 500 ETF, IVV iShares Core S&P 500 ETF, and VOO Vanguard S&P 500 ETF commanded a staggering $363b, $278b, and $221b of investors’ capital this week. Retirement funds are heavily weighted in the SPX top 25.

And since stock-market performance affects so many other markets, the SPX top 25’s quarterly results are very important for all speculators and investors. Capital flows into and out of bonds, the US dollar, and leading alternative assets like gold and cryptocurrencies are heavily influenced by stock-market fortunes. So closely watching the big US stocks’ price trends and fundamentals is universally important for all traders.

This table outlines key fundamentals of the 25 largest companies in the US stock markets. Their stock symbols are preceded by how their rankings within the SPX shifted in the year since the end of Q1’20. After their symbols, these companies’ actual percentage weightings within the S&P 500 at the end of Q1’21 are shown, along with their market capitalizations in billions back when that reporting quarter was ending.

Their market caps, as well as their other fundamental data, are followed by year-over-year changes from the ends of Q1’20 to Q1’21. Looking at market-cap changes offers a purer read on companies’ values than stock-price changes, normalizing out some manipulative effects of corporate stock buybacks. Those are done to artificially boost share prices and earnings per share, maximizing executives’ compensation.

Quarterly revenues, GAAP corporate profits, earnings per share, trailing twelve-month price-to-earnings ratios as of quarter-end, dividends paid, and operating cash flows generated are shown. These key data are also followed by YoY changes. Blank fields usually mean a company hadn’t reported that particular data as of mid-week. Disney for example is dragging its feet, keeping shareholders waiting until May 13th.

Percentage changes are also excluded if they are misleading or not meaningful, primarily when data shifted from positive to negative or vice versa. Unfortunately, some companies run goofy fiscal quarters offset from calendar ones, making them harder to compare with their peers. Walmart, Home Depot, and NVIDIA report on quarters ending one month later than normal. So their latest-reported quarters are included.

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