Most U.S. market segments strengthened Friday, but U.S. equities and stock exchange traded funds still slipped after Wal-Mart (NYSE: WMT) and other consumer stocks plunged on the Amazon (NasdaqGS: AMZN) and Whole Foods (NasdaqGS: WFM) deal.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.2% lower Friday.
Amazon said it would acquire Whole Foods for $42 per shares, valuing the grocer at a 27% premium to its Thursday close.
The retail sector sank after the deal by Amazon was interpreted as a threat to brick-and-mortar supermarket chains and grocers. Many feared that Amazon’s foray into the grocery store space would hurt other businesses, similar to what happened when the online retailer weighed on bookstores.
“Dominant players like Wal-Mart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks,” Charlie O’Shea, lead retail analyst at Moody’s Investors Service, told Reuters.
Traditional grocers were also already under pressure after Kroger (NYSE: KG), the country’s largest supermarket chain, warned of disappointing earnings.
“This is a shot across the bow,” Sean Lynch, co-head of global equities at the Wells Fargo Investment Institute, told the Wall Street Journal. “The worry is that Amazon is going to impact the market, drive margins down.”
U.S. markets continue to trade within range after withstanding a week with a Federal Reserve interest rate hike, renewed political concerns that could delay the Trump administration’s pro-growth agenda and a pullback in the tech sector.
“The data this week has not been encouraging,” Mariann Montagne, a portfolio manager at Gradient Investments LLC, told Bloomberg. “We need to see consumer spending pick up and more confidence across the board before we can get going again. We’re in a weird limbo, coupled with the the summer doldrums. But if we had great numbers coming out, there would be decisions made.”
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