Stocks traded in a narrow range on Monday as investors awaited the start of a new earnings season. The Dow Jones Industrial Average (DJINDICES: ^DJI) closed flat and the S&P 500 (SNPINDEX: ^GSPC) had a small gain.
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Today's stock market
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The retail sector fell and energy stocks rose. The SPDR S&P Retail ETF (NYSEMKT: XRT) lost 2.4%, and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) gained 1.5%.
As for individual stocks, shares of Abercrombie & Fitch (NYSE: ANF) dropped sharply on news of terminated buyout talks, and Best Buy (NYSE: BBY) sank on concerns about a new service from Amazon.com (NASDAQ: AMZN).
Abercrombie decides to go it alone
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Shares of fashion apparel retailer Abercrombie & Fitch tumbled 21.1% today after the company issued a press release reporting that efforts to sell itself have been terminated. Abercrombie had announced on May 10 that it was entering into discussions with several parties for a sale of the company, but had remained steadfastly tight-lipped about the talks since, refusing to comment during the company's first-quarter conference call two weeks later. The news of buyout talks sent shares soaring 12% in a single day, but today's announcement erased those gains and then some.
"After a comprehensive review of all relevant factors, with the assistance of our financial advisor, the A&F Board of Directors determined that the best path to enhance value for stockholders is the rigorous execution of our business plan," said Executive Chairman Arthur Martinez in a press release. "We are committed to taking sound, aggressive action to deliver enhanced performance and long-term stockholder value." The release stated that the company did not intend to comment further on the discussions.
Investors appear less than convinced of Abercrombie's prospects for enhancing stockholder value. Declining mall traffic and pressure from fast-fashion competitors have hit the company hard. Last quarter's results offered little encouragement, with the company reporting a sales decline of 4% and an operating loss of $69.9 million. The fact that Abercrombie & Fitch could not make a deal despite talking with several potential suitors had the market worried today that there was little good news on the horizon.
New concerns about Amazon rock Best Buy shares
Best Buy stock sank 6.3% today after Recode reported that Amazon is quietly rolling out a service that could challenge Best Buy's Geek Squad. Amazon has long contracted with local businesses to help with tasks like hanging and installing TVs, but this new venture uses trained Amazon employees to help customers with the more complicated job of setting up a smart home based around Amazon's voice-controlled Alexa personal assistant. The program has been rolled out in seven areas on the West Coast.
The new service brings Amazon experts into customer homes to help set up items like smart thermostats, light switches, security cameras, and entertainment systems, all of which can be controlled with voice commands to Alexa devices like Echo and Echo Show. The intention is clearly to help embed Amazon's artificial-intelligence-driven ecosystem deeply into consumers' lives and open the door to future sales of related devices.
Geek Squad, focused on the more general tasks of installation and repair, is probably not as threatened as Best Buy's new In-Home Advisor service, a pilot program that the company has been testing in six metro areas and plans to roll out nationwide in the second half of the year. The service provides help designing and setting up complicated networks, smart home devices, and entertainment systems.
Jitters about competition from Amazon are nothing new to Best Buy investors, but the stock has had a robust 2017 thus far; shares are up 27% since the beginning of the year.
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