Retail Stocks Slide in Wake of Amazon's Deal for Whole Foods
June 16 2017 - 4:23PM
Dow Jones News
By Riva Gold
Shares of retailers fell Friday after Amazon.com said it would
buy Whole Foods Market, potentially squeezing their
competitors.
Grocers were already under pressure after Kroger, the nation's
biggest supermarket chain, warned of disappointing earnings a day
earlier. Retailers from traditional grocers to big-box operators
tumbled Friday on fears that Amazon would do to them what it did to
bookstores, analysts and fund managers said.
"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."
The giant internet retailer's stock rose 3%, while Whole Foods
shares jumped 30%.
Rival grocers Supervalu and Kroger both tumbled more than 10%,
capping a brutal week for the industry. Kroger shares sank Thursday
after it said increasing competition will hurt earnings for the
year. That competition isn't letting up -- this week German grocery
chain Lidl opened its first stores in the U.S.
Big-box operators such as Wal-Mart Stores and Target fell nearly
5% and 7%, respectively, on Friday.
Food and staples companies in the S&P 500 were down 5.9% so
far this week, on track for the group's worst weekly decline in
nearly two years.
Technology stocks also slipped, extending losses for a sector
that has been under pressure lately.
The tech-heavy Nasdaq Composite fell 0.2% Friday, on track for a
0.9% weekly loss, while the S&P 500 declined 0.1%. Meanwhile,
the Dow Jones Industrial Average rose 5.5 points, or less than
0.1%, to 21365.
Tech remains the best-performing S&P 500 sector in the index
in 2017, up 17% year-to-date. But some recent sessions have been
rough for the group.
Since June 8, declines in stocks including Apple and Google
parent Alphabet have dragged the sector down nearly 4% as investors
pulled back from one of the most profitable trades of the year so
far. The sector was on track for its third consecutive session of
declines Friday.
"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," Mr. Dewan said.
Despite a wobble in some of this year's best-performing stocks,
both U.S. and global equities posted their biggest weekly inflows
this year in the week ended June 14, 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 has seen
among investors, with many clients waiting for any drop in the
market to add to their stockholdings.
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 steadied on Friday after an eventful
week. The yield on the 10-year Treasury note eased to 2.157% Friday
from 2.160% on Thursday. Earlier in the week, yields dropped
following weaker-than-expected inflation data, then retraced some
of that decline after Federal Reserve officials signaled further
interest-rate increases at Wednesday's meeting. Yields fall as
prices rise.
Energy stocks climbed Friday as the price of oil bounced
recovered. U.S.-traded crude rose 0.6% to $44.74 a barrel Friday,
but prices have fallen more than 11% over the past four weeks.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
June 16, 2017 16:08 ET (20:08 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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