U.S. stock markets went into a sustained slide Thursday after a private data release suggested growth in the services sectors was slowing down considerably.
The Institute for Supply Management said its non-manufacturing purchasing managers' index was 53.5 in April, down from 56.0 in the prior month. That drop was substantially lower than what economists had predicted: a consensus of forecasters surveyed by the Dow Jones Newswires expected the measure to fall only half a point during the month, to 55.5.
Component indexes that measure business activity, new orders, and employment growth all dropped. Prices went down substantially, as inflationary pressures related to high energy costs eased during the month.
The reading intensifies one of the market's most insidious fears regarding the services sector: that considerably healthy growth data earlier in the year was the result of an unusually warm winter in the U.S., and not truly a reflection of improving fundamentals. The disappointing reading also took a lot of the shine off the rise in the ISM manufacturing index reported earlier this week, Paul Dales, senior U.S. economist for Toronto-based Capital Economics, said in an email.
Market-watchers are now focused on upcoming employment reports, which Dales suggests, could also disappoint.
U.S. equities fell hard following the data release, with the benchmark S&P 500 Index, which had been trading within a narrow range close to the previous day's close, dropping nearly half a percentage point before recovering somewhat. The measure was recently off 30 basis points to 1,397.62. Commodities also sold off, with the most-traded contracts for gold and crude on U.S. markets off 1.02 and 2.14 percent, respectively.