Retail Stocks Slide in Wake of Amazon's Deal for Whole Foods
June 16 2017 - 12:28PM
Dow Jones News
By Riva Gold
Shares of retailers fell Friday after Amazon.com said it will
buy Whole Foods Market, potentially squeezing its grocery store
competitors.
It marked another hit to grocers that were already under
pressure after Kroger, the nation's biggest supermarket chain,
warned of disappointing earnings. Retailers from traditional
grocers to big-box operators tumbled on fears that Amazon's plans
to delve deeper into the grocery store space may hurt their
businesses, similar to how the online retailer pressured
bookstores.
"This is a shot across the bow," said Sean Lynch, co-head of
global equities at the Wells Fargo Investment Institute. "The worry
is that Amazon is going to impact the market, drive margins
down."
Amazon said early Friday it would pay $42 a share for Whole
Foods, valuing the grocer at a 27% premium to its closing price
Thursday. The giant retailer's stock jumped 3.1%, while Whole Foods
shares rose 27%.
Rival grocers Supervalu fell 14% and Kroger tumbled 13%. On
Thursday Kroger dropped 19% after its said increasing competition
will hurt earnings for the year.
Big-box operators such as Wal-Mart and Target fell 5.4% and
9.2%, respectively, on Friday.
Technology stocks also ticked lower, extending losses for a
sector that has been under pressure over the past week.
The tech-heavy Nasdaq Composite fell 0.4%. The S&P 500
declined 0.2% and the Dow Jones Industrial Average lost 9.8 points,
or less than 0.1%, to 21350.
Tech remains the best performing S&P 500 sector in the index
in 2017, up 17% year-to-date. But the last week has been rough for
the group. Since June 8, the sector tumbled about 3.9%. On Friday,
the sector slipped 0.2%, on track for its third consecutive session
of declines.
"Tech has done exceptionally well this year," said Yogi Dewan,
chief executive at Hassium Asset Management, pointing to signs of
solid revenue growth in the sector. "But at these valuations, we're
not putting new money into it," he said.
Some of the biggest tech names have posted sharper declines.
Since June 8, Apple's stock has tumbled 7.4%, while Google parent
Alphabet is 5% lower.
Despite a wobble in some of this year's best performing stocks,
equities posted their greatest weekly inflows this year, according
to EPFR Global data. Mr. Dewan said pullbacks this year have been
short and overall volatility has been low because of the high cash
levels he's seen among investors, with many clients waiting for any
pullbacks in the market to add to their stock holdings. Fund
managers surveyed by Bank of America increased cash in their
portfolios in June, bringing their cash allocations well above the
historical average.
Government bond yields were slightly lower, with the yield on
the 10-year Treasury note at 2.154% from 2.160%. Yields fall as
prices rise.
The WSJ Dollar Index slipped 0.2% Friday after climbing
significantly earlier this week after the Federal Reserve's
Wednesday meeting, where officials signaled further interest rate
rises ahead.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
June 16, 2017 12:13 ET (16:13 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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