Stocks dip as Amazon-Whole Foods deal hammers grocery stores

NEW YORK (AP) — U.S. stocks are mostly lower Friday morning as Amazon’s $13.4 billion deal for Whole Foods Market is sending grocery stores, big retailers and food distributors sharply lower. Amazon and Whole Foods are both climbing. Industrial and utility companies are rising Friday and smaller companies are down.

KEEPING SCORE: The Standard & Poor’s 500 index lost 5 points, or 0.2 percent, to 2,427 as of 10:15 a.m. Eastern time. The Dow Jones industrial average fell 30 points, or 0.1 percent, to 21,330. The Nasdaq composite edged down 13 points, or 0.2 percent, to 6,152. The Russell 2000 index of smaller company stocks shed 7 points, or 0.5 percent, to 1,403.

GROCERY SHOPPING: Online juggernaut Amazon said it will buy organic grocery company Whole Foods for about $13.4 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 $8.86, or 26.8 percent, to $41.92 while Amazon climbed $34.87, or 3.6 percent, to $999.04. It’s on pace for its biggest gain this year.

TERROR IN THE AISLES: Amazon has tested grocery stores of its own and also offers Prime Fresh, a $299-a-year grocery delivery service. It’s also something of a unique threat to grocery stores, food producers and other kinds of retailers because Amazon doesn’t mind losing money. Amazon might be able to sell inexpensive groceries as it makes its money from its online marketplace.

Investors responded by dumping the stocks of major retailers and grocery store operators. Four of the five biggest losses in the S&P 500 index in early trading were retailers: Kroger, Target, Costco and Wal-Mart Stores.

Supermarket chain Kroger, which plunged 19 percent Thursday after lowering its sales forecast, lost another $3.27, or 13.3 percent, to $21.29. Target tumbled $6.04, or 10.9 percent, to $49.42. Costco fell $13.62, or 7.6 percent, to $166.45 and Wal-Mart gave up $4.98, or 6.3 percent, to $73.93.

GOING ORGANIC: Many big retailers 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.

Organic and specialty foods distributor United Natural Foods dropped $6.41, or 16.1 percent, to $33.34 and egg producer Cal-Maine Foods tumbled $3.85, or 7.3 percent, to $36.25. Supervalu sank 60 cents, or 16 percent, to $3.16. Drugstores CVS declined $3.99, or 5 percent, to $76.10 and Walgreens sagged $3.75, or 4.5 percent, to $78.81.

BOOZ ALLEN HAMMERED: Defense contractor Booz Allen Hamilton tumbled after it said it is the target of a government investigation. The Bermuda-based company said the Department of Justice is conducting both a civil and criminal investigation into its accounting practices and the way it changes 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 $7.31, or 18.6 percent, to $32.02.

BONDS: Bond prices inched higher. The yield on the 10-year Treasury note fell to 2.16 percent from 2.17 percent.

ENERGY: Benchmark U.S. crude rose 27 cents to $44.73 a barrel in New York. Brent crude, used to price international oils, climbed 40 cents to $47.32 a barrel in London.

CURRENCIES: The dollar rose to 110.95 yen from 110.79 yen. The euro rose to $1.1175 from $1.1155.

OVERSEAS: European stock indexes rose after Greece reached a deal with its eurozone creditors. The agreement will release another 8.5 billion euros ($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 0.7 percent and the DAX is Germany climbed 0.3 percent. Britain’s FTSE 100 gained 0.5 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.