North American stock market indexes opened substantially lower on Tuesday morning, following steep losses in Europe, lower commodity prices and a surprise release from the Institute of Supply Management which suggested that the U.S. services industry had contracted in January.
"The low for the business activity index in the recession of 2001 was 47.9, so it is very tempting to see this survey as evidence that recession is unavoidable," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a note to clients. "But we have never found any predictive power in the survey, which lags growth in core retail sales. We already know holiday sales were horrible, and have worsened since.... Still, ISM optics are horrible - orders down 10.4 points, employment 7.9 points - and will keep pressure on the Fed."
Investors, however, see little upside to the survey. The S&P/TSX composite index fell 94 points in early trading, or 0.7 per cent, to 13,179. The Dow Jones industrial average tumbled 131 points, or 1 per cent, to 12,504. All 30 stocks in the blue-chip index were down, led by Intel Corp., Citigroup Inc. and Alcoa Inc.