* U.S. stocks drop on Amazon.com, Whole Foods deal
* Dollar index lower after U.S. economic data
* Bond yields also down after data; oil edges higher (Updates with U.S. trading; changes dateline, previous LONDON)
By Caroline Valetkevitch
NEW YORK, June 16 (Reuters) - U.S. stocks fell on Friday after Amazon.com's announcement it would buy Whole Foods Market hit the shares of Wal-Mart (NYSE:WMT) and grocers, while disappointing U.S. economic data hurt the dollar and U.S. Treasury yields.
The S&P 500 consumer staples index .SPLRCS , down 1.6 percent, was the biggest drag on the benchmark S&P 500 stock index. Bucking broader declines on news of the deal, Amazon AMZN.O shares surged 3 percent while Whole Foods WFM.O shot up 27.2 percent. uncertainty over the impact of Amazon on the food industry is upsetting the market," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Sarasota, Florida.
Indeed, the deal sent shockwaves through the food distribution market, hurting stocks like Wal-Mart WMT.N , which slid 5.3 percent, Kroger (NYSE:KR) KR.N , which tumbled 13.1 percent, and Costco Wholesale COST.O , which fell 6.1 percent.
"The Amazon news is significant because it could be a game changer in terms of how the food industry operates," though the share price reaction of Wal-Mart and other stocks appeared overdone, Bittles said.
The Dow Jones Industrial Average .DJI was down 2.73 points, or 0.01 percent, to 21,357.17, the S&P 500 .SPX lost 3.94 points, or 0.16 percent, to 2,428.52 and the Nasdaq Composite .IXIC dropped 20.63 points, or 0.33 percent, to 6,144.87.
MSCI's index of stock markets across the world .MIWD00000PUS inched up 0.2 percent, while European shares .FTEU3 added 0.5 percent, rebounding from recent losses.
In the foreign exchange market, the U.S. dollar .DXY fell against a basket of key currencies; it was down 0.3 percent after the day's data, which raised concerns about spending.
U.S. homebuilding fell for a third month in May to the lowest in eight months as construction activity declined broadly, while the University of Michigan said its barometer on U.S. consumer sentiment unexpectedly fell in early June. Japanese yen JPY= reversed course against the dollar after earlier sliding to a two-week low, when the Bank of Japan left its mass money printing program unchanged, maintaining the contrast with the U.S. Federal Reserve, which signaled further tightening this week. weaker-than-expected U.S. data also weighed on U.S. Treasury yields as it fueled uncertainty about the U.S. rate outlook.
Benchmark 10-year Treasuries US10YT=RR were last up 2/32 in price to yield 2.153 percent, compared with 2.162 percent late Thursday.
In commodities, oil edged up but remained on track for losses for the week on persisting worries over the glut in supply. LCOc1 was up 0.6 percent at $47.20 a barrel while U.S. crude CLc1 was up 0.5 percent at $44.66.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarket
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