(FORTUNE Magazine) - WAR, HIGH fuel prices, monetary uncertainty, a percolating deficit, a new Fed chairman, and, of course, a hurricane that broke a critical levee --and America's heart. In financial terms, this year had all the ingredients for a sputtering economy at best, a significant downturn at worst. In spite of the portents of doom, however, America's largest corporations sailed through in extraordinary style, setting records for both revenues and profits.

The reasons vary from industry to industry, and even from company to company, but a couple loomed large. For a start, despite a few small increases, long-term interest rates remained relatively low. That kept the U.S. housing market afloat, if no longer bubbly, and consumer spending strong. And while the Age of Greenspan was one to remember, his successor, Ben Bernanke, is respected. The future of the Fed, the markets seem to believe, is in safe hands. Financial institutions like Bank of America (No. 12) and J.P. Morgan Chase (No. 17) benefited from the calm macroeconomic environment, ringing up healthy profit growth (16.4% and 89.9%, respectively). Finally, with accounting scandals and stateside terrorist attacks fading from memory, cash and equity-rich businesses did a bit of shopping. There was the ultimate family reunion when Ma Bell (AT&T, No. 39) merged with her former offspring, SBC Communications. That and other significant mergers, such as the acquisition of Premco by Valero (No. 15), were encouraging signs of the "animal spirits" that Adam Smith considered the mark of an economy in fine fettle.

The most important thing that didn't happen in 2005 was an oil shock. It wasn't for lack of trying: Prices certainly looked shocking, hitting $3-plus a gallon for a time, and economists took to peering at their spreadsheets through their fingers. Would businesses and consumers hunker down, their confidence battered like Louisiana? Nope. The economy absorbed the blow--and tight supplies drove oil profits to dizzying heights. Petroleum refiners saw profits rise 57.8%, and companies in mining/crude oil, 80.8%.

The biggest story of all was the global economy, which grew 4.25%, according to the OECD, led by a strong year in China and India, a credible recovery in Japan (finally), and a few signs of life in Europe. Companies on the FORTUNE 500 tend to have substantial operations and sales overseas. So a good year for the global economy can translate directly to the bottom line. That helps to account for this year's record numbers: FORTUNE 500 companies brought in $9.1 trillion in revenues and $610 billion in profits. The growth extended up and down the list. At No. 500, title insurer LandAmerica Financial Group's $3.9 billion in revenues are $300 million more than last year's tail-ender.

A figure just shy of $4 billion is not exactly small change--except when compared with Exxon Mobil, for which it would account for less than five days of revenue. Exxon put up numbers the likes of which corporate America has never seen. Back at No. 1 for the first time since 2001, it gushed almost $340 billion in revenues and $36.1 billion in profits. (For those keeping score at home, that works out to $98.9 million in profit per day.) Even so, Exxon's income as a percent of revenues was a comparatively modest 10.6%, ranking only 116th. But the company is just so big that it couldn't help racking up records. Chevron (No. 4) and ConocoPhillips (No. 6) also moved up the list, thanks to revenues that were 28.1% and 37% higher, respectively. "If there's any disruption anywhere, actual or perceived, prices go higher --which reflects the very thin excess capacity in the global oil market," says Mark Zandi, chief economist for Moody's Economy.com. "Clearly, the record-high levels for energy prices meant a windfall for related industries." Among the grateful relations: St. Paul Travelers (No. 85), which saw profits go up 69.8%, helped by a product portfolio that includes oil and liability insurance.

China continued to be a rock, growing at nearly 10% last year, a fact that rippled through the list in a variety of ways. "Look through the list and you see incredible exposure to China," says Abhijit Chakrabortti, U.S. equities strategist for J.P. Morgan. Companies did well that grew, mined, or made what China needs but doesn't produce enough of itself--such as aircraft (Boeing, No. 26), fertilizer (Mosaic, a newcomer at No. 470), and specialty chemicals (Dow Chemical, No. 36). Another China play is to make it a base for manufacturing. Levi Strauss (No. 484) does that, and it is hard to imagine how it could have had its best year in ages (profits up 413.2%) without good performance from its dozens of Chinese factories. Though it is still easy to lose money in the Middle Kingdom, it is no longer possible to ignore it.

Back in the U.S., rising demand for things like metals and mining products was a boon to the transportation sector. Trucking did surprisingly well, considering the way gas prices jacked up costs. And when suppliers did want to turn to rail, there just wasn't enough capacity. The result? As demand chased supply, rail operators raised prices, just like it says in Econ 101. The sector scored, with an 82% median increase in profits. CSX (No. 266) saw the biggest jump, with net income rising 237.8%. The good news extended to new-economy names as well. Profits of Internet services and retailers in the FORTUNE 500 grew 125.9% in 2005--and the sector achieved enough critical mass to merit its own category for the first time. Given their ubiquity, Google (No. 353), Yahoo (No. 412), and eBay (No. 458) seem to have been around the cyber-equivalent of forever. Maybe so, but this is the first year the trio have cracked the 500.

Of the 74 industry groups tracked by the FORTUNE 1,000, only three--airlines, building materials, and motor vehicles--lost money in 2005. And while the economy as a whole grew 3.5% last year, the FORTUNE 500 companies did much better, boosting revenues by 10.2%.

That disparity is no anomaly. Though it might be overstating things to say "as goes the 500, so goes the nation," it wouldn't be by much. Revenue from FORTUNE 500 companies as a proportion of GDP has risen from 39% in 1955 to 73.4% this year. One reason for that is the increased overseas exposure of America's largest companies; revenues booked abroad show up on U.S. income statements. In the next generation, the revenues of the 500 could conceivably exceed that of GDP. Another factor could be that the 500 is stamping a larger footprint, a theory that is plausible given the ever bigger size of the biggest companies. Pat Dorsey, the director of stock research at Morningstar, certainly thinks so: "The economy is becoming more concentrated in a smaller number of large public firms," he says. That theory makes sense; however, it is tough to prove because picking apart how much of the 500's revenues come from where is like separating the blue from the sky.

Of course, influence is not omnipotence, and things can still go very wrong. Case in point: the state of the U.S. auto industry. GM (No. 3) had an awful year, losing $10.6 billion; its 327,000 employees are hurting. According to recently restated earnings, sales fell, while costs--such as health care and pension obligations--did not. Enmeshed with the health of GM is auto parts maker Delphi (No. 77), which dropped 14 places on the list in the wake of its own bankruptcy filing. One fairly bright spot is Johnson Controls (No. 75), which continued its steady run, increasing profits and revenues. Tenneco (No. 463) may be another. Profit margins remain nano-thin at the auto parts maker ($58 million on $4.4 billion in revenues), but at least they exist--and indeed, almost tripled.

If the 500 is so important and had such a good year, why was the stock market so torpid? (The S&P 500 rose about 3%.) We have an answer for that. Since 2000 large-cap stocks have responded nimbly to an economic downturn and the technology bust. But blue chips have felt little love from market watchers, many of whom suspect they are overvalued. Instead, investors have focused on small caps and emerging-market stocks for the past several years. "When shares are flat, they're not in the news," says Dorsey. "But with the strength of the underlying businesses so strong, some of these companies are beginning to look more fairly valued."

Their hour may be coming: For the first time in six years, in 2005 the large-cap Russell 1000 index outperformed the small-cap Russell 2000, with respective gains of 6.3% and 4.6%.

HOWEVER BOUNTIFUL for business, 2005 was a terrible year for many people. That did not go unnoticed by companies in the FORTUNE 500, many of which seemed eager to display their good citizenship. Corporate giving typically accounts for 5% of U.S. philanthropy, says Patrick Rooney, the director of research for the Center on Philanthropy at Indiana University. But large U.S. corporations, he figured, "gave 17% of total hurricane-related giving in 2005, 29% of the tsunami relief, and 58% of the relief for the Pakistan earthquake."

When the earth rumbled in Pakistan, Boeing (No. 26) wrote a check for $2 million. When water washed away villages in Southeast Asia, Pfizer (No. 31) sent $10 million in cash and $25 million in medication. Post-Katrina, Coca-Cola (No. 89) sent $10 million, and Wal-Mart (No. 2) outperformed FEMA. The list goes on and on. The returns on those investments cannot be calculated precisely. But in a year when there was so much pain and worry that didn't show up in the bottom line, they are worth a mention.

REVENUES WERE $9.1 TRILLION, AN INCREASE OF 10.2%

PROFITS WERE $610 BILLION, AN INCREASE OF 18.8%