Whole Foods deal looms over the market
NEW YORK — Amazon’s $13.7 billion deal for Whole Foods sent grocery stores, big retailers, and food makers and distributors plunging Friday. Energy companies rose while other stocks were little changed.
It’s rare for a single deal to have a big effect on the broader stock market, but Amazon’s agreement to buy Whole Foods Market did. Investors wondered if Amazon will do to grocery stores and supermarkets what it’s done to sellers of goods like clothing and office supplies: force them to make big changes or be supplanted.
Neil Saunders, managing director of the research firm Global Data Retail, said Amazon is likely to push supermarkets and grocery stores to slash prices, which will affect the companies that make and distribute those products.
“As Amazon enters the grocery market proper, it will put a lot more pressure on existing grocers,” he said. “Those grocers will respond by cutting prices, and that will cut profits for the distributors.”
Elsewhere, energy companies rose as oil futures bounced back from their lowest price this year, and utilities and industrial and basic materials ground out modest gains.
Thanks to a late gain, the Standard & Poor’s 500 index inched up 0.69 points to 2,433.15. The Dow Jones industrial average added 24.38 points to a record high of 21,384.28. The Nasdaq composite fell 13.74 points to 6,151.76.
Whole Foods stock jumped $9.62, or 29.1 percent, to a two-year high of $42.68. Amazon climbed $23.54, or 2.4 percent, to $987.71 Walmart had its worst day in more than a year as it fell $3.67, or 4.7 percent, to $75.24. Costco took its biggest loss in almost six years as it sank $12.95, or 7.2 percent, to $167.11. Target fell $2.85, or 5.1 percent, to $52.61.
Amazon is a unique threat to many retailers because it doesn’t mind losing money for long stretches. The company might be able to sell inexpensive groceries as it makes its money from its cloud computing business and its gigantic online marketplace.
“Is the future of grocery store shopping going to be a point-and-click experience, or is it going to be going to a grocery store?” said Dan Morgan, senior portfolio manager at Synovus Trust.