US: Whole Foods deal roils Wall St; energy shares gain

[NEW YORK] Major US stock indexes ended little changed on Friday even as Amazon.com's US$13.7 billion deal to buy upscale grocer Whole Foods roiled the retail sector and rocked shares of an array of companies including Wal-Mart and Target.

Energy sector shares helped buoy the S&P 500 and the Dow industrials, while Apple dragged on the Nasdaq.

The deal by Amazon, a proven retail disruptor, marked a major step by the internet retailer into the brick-and-mortar retail sector.

Wal-Mart shares sank 4.7 per cent, weighing the most on the Dow. Shares of Target, Walgreen Boots and Costco fell between 5 per cent and 7 per cent.

"It's going to send a shock wave across the board, and this represents the true utmost in market disruption," said Burns McKinney, chief investment officer with the Dallas investment team for Allianz Global Investors. "There's big winners and big losers." Amazon shares gained 2.4 per cent, making the stock the biggest boost to the S&P 500. Whole Foods shares surged 29.1 per cent.

The S&P consumer staples sector fell 1 per cent, by far the worst performing major sector. The S&P 500 food and staples retailing index dropped 4.2 per cent.

Grocery chain Kroger was the biggest loser on the S&P 500, falling 9.2 per cent, while Supervalu dropped 14.4 per cent.

"I would not like to be somebody playing in the grocery space right now," said Jan Rogers Kniffen, chief executive of retail consultancy firm J. Rogers Kniffen WWE in New York.

The Dow Jones Industrial Average rose 24.38 points, or 0.11 per cent, to end at 21,384.28, the S&P 500 gained 0.69 point, or 0.03 per cent, to 2,433.15 and the Nasdaq Composite dropped 13.74 points, or 0.22 per cent, to 6,151.76.

The technology sector fell 0.2 per cent, continuing its recent slump. Apple shares closed down 1.4 per cent.

Tech has led the S&P 500's 8.7 per cent rally this year, but posted its second week of declines, prompting questions over whether investors are moving money into other sectors.

"I think we need to see more of a pullback to say there is a serious rotation going on as opposed to just some profits coming off the top," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

Energy shares rose 1.7 per cent, propping up the S&P 500. Oil prices bounced off the year's lows as some producers reduced exports and US rig additions slowed.

US homebuilding fell for a third straight month in May to the lowest in eight months as construction activity declined broadly. Investors were continuing to digest the Federal Reserve's interest rate hike on Wednesday, with some concerned about the economy's ability to absorb higher rates.

In other corporate news, Booz Allen Hamilton shares dropped 19 per cent after news of a US Department of Justice investigation.

Advancing issues outnumbered declining ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.22-to-1 ratio favored decliners.

About 9.7 billion shares changed hands in US exchanges, well above the 6.8 billion daily average over the last 20 sessions.

REUTERS