NEW YORK – UNITED States stocks tumbled yesterday, led by a sell-off among shares of financial companies, as a report showing a contraction in the vast services sector last month heightened recession fears.
Data from the Institute for Supply Management (ISM) underscored concerns that the fallout from the housing slump was spreading to the broader economy.
In early trading, the Dow Jones Industrial Average was down 237.93points, or 1.88 per cent, at 12,397.23.
The consensus among ISM’s survey respondents was that the services sector, which included industries such as restaurants, banking, construction, retailing and travel, had ‘come to the end of a long-term period of growth’, Mr Anthony Nieves, chairman of the ISM’s business survey committee, said in a statement.
ISM reported that its index of service sector business activity declined to 44.6 last month from a revised reading of 54.4 in December.
It was the first time the services sector reading contracted since March 2003. A reading above 50 indicates expansion, while a reading below 50 indicates contraction.
Price increases have slowed while costs are up, said Mr Nieves, who is also senior vice- president for supply management at Hilton Hotels.
Survey respondents cited recession fears taking hold and high energy prices dragging down profitability.
ISM said only three service industries reported growth, while 14 showed a contraction.
Source: REUTERS, ASSOCIATED PRESS (The Straits Times 6 Feb 08)