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The U.S. service sector grew unexpectedly in April, snapping a three-month period of contraction, according to a report released Monday.
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A reading above 50 indicates growth in the service sector.
Economists had expected a reading of 49.1 for April, according to the median of forecasts in a Reuters poll.
The surprisingly strong outcome helped stocks pare losses and boosted the dollar. Government bonds, which usually benefit from weak economic data, fell as investors factored in a smaller chance that the Federal Reserve would cut interest rates again when it meets in June.
The news follows data on Friday showing the U.S. economy lost far fewer jobs in April than expected, lending support to investors hoping the current slowdown will be relatively mild.
"The report is consistent with the trend we have been seeing that the U.S. economy is not as disappointing as many initially thought," said Nick Bennenbroek, head of foreign exchange strategy at Wells Fargo in New York.
Consistent with the surprisingly resilient jobs data, ISM's non-manufacturing employment index rose to 50.8 from 46.9 in March.
This marked the biggest improvement in the jobs picture for services since September 2007.
The service sector represents about 80 percent of U.S. economic activity, including businesses such as banks, airlines, hotels and restaurants.
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Data is a real-time snapshot *Data is delayed at least 15 minutes