US stocks dip; grocers hit on fear of price war

VIDEO: REUTERS

NEW YORK (AFP) - Wal-Mart Stores and other food retailers took a hit on Thursday (Aug 24), dragging US stocks lower, after Amazon vowed to cut prices at its Whole Foods Market acquisition.

Shares of Wal-Mart sank 2 per cent, while Costco Wholesale shed 5 per cent and Target 4 per cent after Amazon announced the US$13.7 billion (S$18.6 billion) takeover would close on Monday and that it would immediately cut prices on select products to make natural and organic food "affordable for everyone".

The statement came as markets look ahead to a heavily anticipated central banker summit.

The Dow Jones Industrial Average fell by 0.1 per cent to 21,783.40.

The broad-based S&P 500 shed 0.2 per cent to 2,438.97, while the tech-rich Nasdaq Composite Index dropped 0.1 per cent to 6,271.33.

Amazon's statement revived worries that retailer earnings would be pressured by the online giant's entry into brick-and-mortar groceries.

"Amazon is wasting no time in making the most of its newest division," said a note from Mr Neil Saunders at GlobalData Retail.

"Worryingly for others in the market, these things are only the opening salvo in what will be a time of rapid change."

US stocks have been choppy this week, rising solidly on Tuesday but declining on Wednesday, with analysts pointing to uneasiness over American politics and Friday's central bank summit in Jackson Hole, Wyoming, that could signal a more dramatic shift away from the easy money policies of recent years.

At the same time, analysts are watching to see if Federal Reserve Chair Janet Yellen emphasises low inflation, which would be seen as a signal the Federal Reserve could abandon plans for a third interest rate hike after two earlier rises.