The Toronto stock market fell sharply Thursday as investors reacted to a worse than expected reading on the American non-manufacturing sector.

The S&P/TSX composite index closed down 215.22 points, or 1.8 per cent, at 12,014.90.

The Canadian dollar was off a quarter 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, which make up about 90 per cent of the American economy. That 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.

Adding to the selling pressure was the signal by the European Central Bank Thursday thatit had no immediate plans for new monetary stimulus.

The TSX fell sharply Thursday on worries about the U.S. recovery

"The prospects for a slower global economy with limited growth in some countries and outright recessions in others continue to drive expectations for resource demand and commodity prices lower," Colin Cieszynski, a market analyst with CMC Markets Canada said.

The Dow Jones industrial index lost 61.98 points to finish at 13,206.59. The Nasdaq composite index moved 35.55 points lower to 3,024.30. while the S&P 500 index fell 10.74 points to 1,391.57

The June bullion contract in New York closed down $19.20 at $1,634.80 US an ounce. The July copper contract slipped five cents to $3.74 US a pound, and the June crude contract on the New York Mercantile Exchange fell $2.68 to $102.54 US a barrel.

European markets were mixed as London's FTSE 100 index closed up 0.15 per cent, Frankfurt's DAX declined 0.24 per cent and the Paris CAC 40 shed 0.09 per cent.

With files from CBC News