Wall St surges on German vote and GDP figures

A flight to the safety of big name stocks seemed to be the only clear trend on a volatile day which saw strong divergence between the different US indices.

The benchmark S&P 500 swung more than 3 per cent during the session, before closing 0.8 per cent up at 1,160.38. It was sandwiched by the blue-chip heavy Dow Jones Industrial Average, which was up 1.3 per cent to 11153.91, and the smaller cap Nasdaq Composite index, which fell 0.4 per cent to 2,480.76.

“Investors are heading to the safety of names offering quality and yield,” said Andrew Wilkinson, Chief Economic Strategist at Miller Tabak.

“Risks appear to be rising as the month ends: Not something that was on the cards first thing this morning,”

In the first minutes of trading the S&P had surged 2 per cent on news that the latest eurozone bailout packaged had passed a key vote in the German parliament, and an upward revision to second quarter growth data.

Financials led the way, eventually closing up 2.8 per cent with life insurers faring particularly well.

Genworth Financial closed up 7.8 per cent to $6.00 and Lincoln National Corporation up 5.6 per cent to $16.46.

Investment bank Morgan Stanley jumped 6.6 per cent to $15.09 and rival Goldman Sachs was up 3.7 per cent to $99.87, although Deutsche Bank predicted Goldman would delcare a loss this quarter.

Discover Financial Services , the Illinois-based credit card company, fell 1.2 per cent to $23.60 after revealing regulators plan to bring an enforcement case over its marketing of fee-based products.

But it was a strange rally, with defensive utility stocks the second best performing sector in the S&P 500, ending the day up 1.5 per cent, and cyclical consumer discretionary and tech stocks down, 0.9 per cent and 0.4 per cent respectively.

Advanced Micro , a semiconductor manufacturer, which supplies personal computer companies, fell 13.7 per cent to $5.31 after the California-based company reduced its forecast for quarterly revenue and gross margins.

“We believe AMD had a tremendous opportunity to gain revenue share in notebooks this year,” Nomura analyst Romit Shah wrote to clients. “However, a lack of component supply has been a major impediment to growth and will probably not be resolved in the near term.”

Fellow semiconductor stock Micron Technology , which was set to declare results after the bell Thursday, was also down 4.1 per cent to $5.87.

Consumer discretionary stocks were led down by internet stocks Amazon , off 3.2 per cent to $222.44 and Netflix , down 10.9 per cent to $113.19.

James Cordwell, tech analyst at Atlantic Equities, said Netflix was suffering a “slow bleed” because of investor uncertainty over the company’s strategy, in the wake of a decision to separate the physical DVD delivery and streaming businesses.

Several traders speculated that mutual funds were dumping small cap and less well known stocks ahead of the quarter end, when they will have to reveal holidings to clients.

But others said the move to more liquid, highly traded stocks, made strategic sense.

“It’s much more difficult to get out [of small caps] in a really bad market. It’s telling you the market is by no means assured that Europe has a handle on things.” said Kenneth Polcari, managing director at Icap.

US-listed Chinese stocks had a rough day after the Securities and Exchange Commission said the Justice Department is looking into allegations of accounting fraud.

Sina Corporation , the e-commerce and social networking site, fell 9.7 per cent to $73.23. Youku, the recently listed video-streaming website fell 18.3 per cent to $16.25.

Edwards LifeSciences tumbled after the administrator of the government’s Medicare and Medicaid programmes dealt a blow to hopes of a rapid roll-out for its new cardiovascular device.

The medical device manufacturer is banking on strong revenue from its transcatheter aortic-valve implant (TAVI) device, a treatment for aortic stenosis – a heart disorder – that does not involve an operation.

On Thursday, the Centre for Medicaid and Medicare (CMS) began the process for considering covering TAVI under the government’s health programmes.

CMS approval would normally lead to private insurers following suit.

But CMS suggested that trials be limited to patients deemed inoperable rather than include patients seeking an alternative to operations.

“We think TAVI will deliver very good growth for Edwards in the long-term,” said Jason Mills, medical devices analyst at Cannacord Genuity. “But we think the consensus expectations on Wall Street have been too agressive on rollout in the first few years and that’s what’s suggested by CMS today.”

Edwards shares fell 6.6 per cent to $70.87.

Mosaic , the phosphate and potash producer, fell 5.2 per cent to $54.20 after reporting earnings of $1.17 a share for the quarter ended August 31.