TSX Slides: U.S. Service Sector Growth Disappoints, ECB Chief Offers No New Help: Stocks Tumble as Economic Data Disappoints

By Morrison, Malcolm | The Canadian Press, May 3, 2012 | Go to article overview

TSX Slides: U.S. Service Sector Growth Disappoints, ECB Chief Offers No New Help: Stocks Tumble as Economic Data Disappoints


Morrison, Malcolm, The Canadian Press


TORONTO - The Toronto stock market tumbled Thursday as a worse than expected reading on the American non-manufacturing sector and worries about Europe trumped a slew of strong earnings reports.

The S&P/TSX composite index fell 215.15 points at 12,014.97, with the markets also weighed down by Research In Motion (TSX:RIM) as the BlackBerry maker's stock closed below $12 for the first time since late 2003.

RIM shares fell 72 cents or 5.7 per cent to $11.91. The company stock also lost about five per cent in each of the previous two sessions despite having rolled out its new BlackBerry 10 operating system.

The TSX Venture Exchange lost 14.6 points to 1,416.61.

The Canadian dollar was off 0.25 of a cent at 101.12 cents US.

U.S. markets also turned lower after the Institute for Supply Management said its index of non-manufacturing activity dropped to 53.5 last month from 56 in March. Any reading above 50 indicates expansion but the reading was a disappointment to traders who had expected a reading of 55.4.

The ISM's survey covers all sectors outside of manufacturing, totalling about 90 per cent of the American economy. The survey includes retail, construction, financial services, health care and hotels.

"So the backdrop is, hey, the U.S. is slowing and when you have the non-manufacturing index (slowing), and that's 90 per cent of the economy, that's a worry," said John Stephenson, portfolio manager at First Asset Funds Inc.

The latest ISM data added to uncertainty about the strength of the U.S. economy. Earlier this week, the ISM's index on the manufacturing sector exceeded expectations.

"You have all of these cross-currents, good corporate earnings as opposed to fairly pessimistic to bleak economic outlooks," Stephenson said.

The Dow Jones industrial index lost 61.98 points to 13,206.59.

The Nasdaq composite index moved 35.55 points lower to 3,024.3, while the S&P 500 index slipped 10.74 points to 1,391.57.

There was good news a day before the release of the U.S. non-farm payrolls report. The U.S. Labour Department announced that jobless insurance claims for last week came in at 365,000, down 27,000 from the previous week.

Economists expect the U.S. economy cranked out about 160,000 jobs in April.

But the positive jobless news was also overshadowed by worries about deteriorating economic conditions in Europe and pessimism over what the European Central Bank can do to spur growth.

ECB president Mario Draghi offered little prospect that the bank would deliver more support for the struggling economies of the 17-country eurozone.

Instead, he is urging governments to agree to a growth strategy that would work alongside tough spending cuts.

Budget cuts and tax hikes, which have been introduced by eurozone governments to reduce debt, are now seen as hurting growth and some European governments are calling for policies to focus more on stimulating economic activity. …

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