It looks like the ongoing global economic uncertainty is starting to hit home, as major American firms are starting to pile up cash instead of investing it. A September 24th report from FactSet Insight highlights that the S&P 500 (ex-Financials) cash and short-term investments in the second quarter totaled $1.43 trillion, the second highest level in a decade.
As FactSet research analyst Andrew Birstingl notes:”This amount reflected 5.5% growth on a year-over-year basis and 3.9% growth quarter-over-quarter. Seven out of nine sectors posted positive year-over-year growth, with the Consumer Discretionary (-0.8%) and Industrials (-0.9%) sectors being the only decliners.”
Breakdown of S&P 500 2Q 2015 cash balances
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FactSet data shows that the IT sector had the largest cash balance ($546.3 billion) in the S&P 500 at the end of the second quarter. Five of the top 10 companies in terms of quarterly cash balance were in this sector: Microsoft at $96.5 billion, Google at $69.8 billion, Cisco Systems at $60.4 billion, Oracle at $54.4 billion and Apple at $34.7 billion. The Telecom and Utilities sectors were the leaders in year-over-year growth in 2Q. The Telecom sector, which has historically kept the smallest average cash balance, ended the second quarter with $28.2 billion in cash, a 28.4% increase year over year. The Utilities sector had the smallest cash balance at the end of the quarter with $27.2 billion in cash, a move up of 15.3% year-over-year.
In transactions of note in the second quarter, AT&T marketed $17.4 billion in bonds to finance its $65 billion acquisition of DIRECTV. This was the third-largest corporate debt issue ever, and pushed the firm’s cash balance up by $6.9 billion from a year ago. In addition, Frontier Communications sold $2.6 billion in stock to fund its $10.5 billion purchase of Verizon’s wireline operations in several states, announced in February of this year. This led to a year-over-year cash balance increase of $2.3 billion for Frontier.
Cash in the Utilities sector was also boosted when Exelon, the U.S. nuke operator, sold $4.2 billion worth of bonds to finance its recent acquisition of Pepco Holdings.
Capital expenditures for the s&P 500 cane to $153 billion in the second quarter, a notable 5.6% decrease from 2Q year ago. This 5.6% drop off represents the biggest year-over-year decline in capex since the summer of 2010. Birstingl motes that the second quarter of 2015 was only the second time that the S&P 500 (ex-Financials) saw a year-over-year decline in capex.
Looking at capex by sector, the Energy, Industrials, Materials, and Telecom groups all saw negative capex growth in the second quarter on a year-over-year basis. The Energy sector saw a massive 23.8% decrease, while the Industrials sector followed with a 13.5% decline. Keep in mind that historically Energy firms have spent the most on capex compared to the sectors. In fact, the sector represented 26% of CapEx for the S&P 500 (ex-Financials) in mid-2015, so when it slumped, capex for the whole index fell. Somewhat shockingly, 77% of the firms in the Energy sector had year-over-year declines in capital expenditures in the second quarter.