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In this July 6, 2011 photo, technician Chris Shannon works on a costumers car at a Pep Boys Auto retail and service location, in Philadelphia.

Matt Rourke/AP

The U.S. services sector expanded in January although the pace slowed slightly from the previous month, with robust jobs growth offsetting slowness in new orders, according to a report released on Tuesday.

The Institute for Supply Management said its services sector index eased slightly to 55.2 last month from 55.7 in December. The reading was in line with economists' forecasts, according to a Reuters survey.

The employment sub-index was at its highest since February 2006, rising to 57.5 in January from 55.3 in December.

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A reading above 50 indicates expansion in the sector, while one below 50 indicates contraction. The index was last below 50 in December 2009 as the U.S. economy was beginning to recover from the financial crisis and recession.

U.S. stocks were higher after the news but much of the rise was a rebound from their worst daily loss since November in the prior session. The S&P 500 index rose 0.8 per cent.

The growing services sector chimed with a separate earlier report that showed U.S. home prices rose for a 10th consecutive month on a year-over-year basis in December, posting their biggest gain in more than six years. The report was released by data analysis firm CoreLogic.

However, there were some signs of weakness in the ISM survey's underlying components. The new orders index, seen as a forward-looking measure, was at its lowest since April 2012, falling to 54.4 in January from 58.3 the month before.

The business activity index also fell, dipping to 56.4 from 60.8 the month before and hitting its lowest since August 2012.

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