Stocks dip as Amazon-Whole Foods deal hammers grocery stores
NEW YORK (AP) — U.S. stocks are lower Friday as Amazon's $13.4 billion deal for Whole Foods Market is sending grocery stores, big retailers, and food makers and distributors sharply lower. Amazon and Whole Foods are both climbing. Energy companies are rising as the price of oil moves higher and smaller companies are down.
KEEPING SCORE: The Standard & Poor's 500 index lost 7 points, or 0.3 percent, to 2,424 as of 11:15 a.m. Eastern time. The Dow Jones industrial average edged down 29 points, or 0.1 percent, to 21,330. The Nasdaq composite fell 38 points, or 0.6 percent, to 6,127. The Russell 2000 index of smaller company stocks shed 11 points, or 0.8 percent, to 1,399.
GROCERY SHOPPING: Online juggernaut Amazon said it will buy organic grocery company Whole Foods for about $13.4 billion, or $42 a share. Whole Foods Market had been the target of sale rumors for two months, boosting its stock. The shares last traded at $42 about two years ago. Whole Foods jumped $8.91, or 27 percent, to $41.97 while Amazon climbed $30.16, or 3.1 percent, to $994.33.
TERROR IN THE AISLES: Amazon has tested grocery stores of its own and also offers Prime Fresh, a $299-a-year grocery delivery service. It's also something of a unique threat to grocery stores, food producers and other kinds of retailers because Amazon doesn't mind losing money. Amazon might be able to sell inexpensive groceries as it makes its money from its online marketplace, and do to big grocery stores what it's done to many other retailers.
Investors responded by dumping the stocks of major retailers and grocery store operators. Four of the five biggest losses in the S&P 500 index in early trading were retailers: Kroger, Target, Costco and Wal-Mart Stores.
Target tumbled $4.65, or 8.4 percent, to $50.812. Costco fell $10.61, or 5.9 percent, to $169.45 and Wal-Mart gave up $4.35, or 5.5 percent, to $74.65.
GOING ORGANIC: Many big retailers have started trying to sell more groceries in the last few years to try to capitalize on shoppers' yen for fresher, more natural food. That was a trend Whole Foods helped start.
Supermarket chain Kroger, which plunged 19 percent Thursday after lowering its sales forecast, lost another $3.06, or 12.5 percent, to a three-year low of $21.48. Sprouts Farmers Market skidded $1.69, or 7.5 percent, to $20.74 and Supervalu sank 51 cents, or 13.6 percent, to $3.25.
Organic and specialty foods distributor United Natural Foods dropped $5.83, or 14.7 percent, to $33.92 and Sysco Foods fell $2.12, or 3.8 percent, to $53.41. Egg producer Cal-Maine Foods tumbled $2.64, or 6.7 percent, to $36.46.
Drugstore CVS declined $4.11, or 5.1 percent, to $75.98 and Walgreens sagged $4.67, or 5.7 percent, to $77.89.
Big food companies also tumbled. Campbell Soup fell $1.83, or 3.2 percent, to $55.13 and Hormel lost 91 cents, or 2.6 percent, to $33.70. General Mills dipped $1.83, or 3.1 percent, to $57.
BOOZ ALLEN HAMMERED: Defense contractor Booz Allen Hamilton tumbled after it said it is the target of a government investigation. The McLean, Virginia-based company said the Department of Justice is conducting both a civil and criminal investigation into its accounting practices and the way it changes the U.S. government. The company said it is cooperating with the investigation and its own auditing hasn't turned up any major erroneous costs or problems. The stock fell $7.22, or 18.4 percent, to $32.11.
ENERGY: Benchmark U.S. crude rose 20 cents to $44.66 a barrel in New York. Brent crude, used to price international oils, climbed 34 cents to $47.26 a barrel in London.
BONDS: Bond prices inched higher. The yield on the 10-year Treasury note fell to 2.15 percent from 2.17 percent.
CURRENCIES: The dollar slipped to 110.70 yen from 110.79 yen. The euro rose to $1.1197 from $1.1155.
OVERSEAS: European stock indexes rose after Greece reached a deal with its eurozone creditors. The agreement will release another 8.5 billion euros ($9.5 billion) in rescue money, which means the country won't face the risk of bankruptcy when it has to make a big debt payment next month. France's CAC 40 added 0.7 percent and the DAX is Germany climbed 0.3 percent. Britain's FTSE 100 gained 0.5 percent.
Japan's Nikkei 225 stock index rose 0.6 percent after the Bank of Japan said there are signs of improvement in the world's third-largest economy. South Korea's Kospi finished little changed. Hong Kong's Hang Seng rebounded 0.2 percent.