Stocks Dip as Amazon-Whole Foods Deal Hammers Grocery Stores

U.S. stocks are slightly lower Friday as Amazon’s $13.7 billion deal for Whole Foods Market is sending grocery stores, big retailers, and food makers and distributors plunging. Amazon and Whole Foods are both climbing, and energy companies are rising as the price of oil moves higher.

KEEPING SCORE: The Standard & Poor’s 500 index lost 2 points, or 0.1 percent, to 2,430 as of 1:10 p.m. Eastern time. The Dow Jones Industrial Average edged up 8 points to 21,367. The Nasdaq composite fell 15 points, or 0.2 percent, to 6,150. The Russell 2000 index of smaller company stocks shed 8 points, or 0.6 percent, to 1,401.

GROCERY SHOPPING: Online juggernaut Amazon said it will buy organic grocery company Whole Foods for about $13.7 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 $9.44, or 28.6 percent, to $42.50, while Amazon climbed $27.95, or 2.9 percent, to $992.12.

Amazon has tested grocery stores of its own and also offers Prime Fresh, a $299-a-year grocery delivery service. Many investors suspected it would eventually make a bigger move into that business.

It’s rare for a single deal to have a big effect on the broader stock market, but the deal between Amazon and Whole Foods did. Neil Saunders, managing director of the research firm Global Data Retail, said Amazon is likely to push companies that sell food to lower their 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.”

TERROR IN THE AISLES: Investors responded by dumping the stocks of major retailers. Many of them 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.

Target tumbled $3.79, or 6.8 percent, to $51.67. Costco fell $9.83, or 5.5 percent, to $170.23, and Wal-Mart gave up $3.53, or 4.5 percent, to $75.38.

Drugstore CVS declined $3.30, or 4.1 percent, to $76.79 and Walgreens sagged $4.08, or 4.9 percent, to $78.48.

Amazon is also something of a unique threat to many retailers because it doesn’t mind losing money for long stretches. Amazon might be able to sell inexpensive groceries as it makes its money from its cloud-computing business and its gigantic online marketplace, and do to big grocery stores what it’s done to sellers of goods like clothing and office supplies.

“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.

GREEN GROCERS SEE RED: Supermarket chain Kroger, which plunged 19 percent Thursday after lowering its sales forecast, lost another $2.64, or 10.7 percent, to a three-year low of $21.92. Sprouts Farmers Market skidded $1.09, or 4.9 percent, to $21.33, and Supervalu sank 50 cents, or 13.3 percent, to $3.26.

Big food companies also tumbled. Campbell Soup fell $1.66, or 2.9 percent, to $55.30, and Hormel lost 78 cents, or 2.3 percent, to $33.82. General Mills dipped $1.64, or 2.8 percent, to $57.19. Among food distributors, United Natural Foods dropped $2.87, or 7.2 percent, to $36.88, and Sysco Foods fell $1.79, or 3.1 percent, to $53.75.

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 charges 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 $7.18, or 18.3 percent, to $32.15.

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. Occidental Petroleum rose $1.30, or 2.2 percent, to $60.70, and Chevron gained $1.24, or 1.2 percent, to $107.57.

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 edged up to 110.85 yen from 110.79 yen. The euro rose to $1.1188 from $1.1155.

OVERSEAS: European stock indexes rose after Greece reached a deal with its eurozone creditors. The agreement will release another $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 0.9 percent and the DAX in Germany climbed 0.5 percent. Britain’s FTSE 100 gained 0.6 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.