For the first time in almost five years, the United States' services sector - including restaurants, travel, banking, construction and retail - contracted in January, stoking rising worries of a recession.

The Institute for Supply Management's report, released Tuesday, shook the stock market while bond prices surged.

"This is an absolute collapse of this index," said Nigel Gault, chief US economist at Global Insight.

Slight slowdown

The Institute for Supply Management reported that its index of service sector business activity declined to 44.6 in January from a revised reading of 54.4 in December.

Economists surveyed by Thomson Financial/IFR had expected a slight slowdown but had still forecast growth, with a median estimate for the index of 53.

A reading above 50 indicates expansion, while below 50 indicates contraction. It was the first time the service sector reading has contracted since March 2003.