A positive report on the economy failed to keep Canadian markets out of negative territory Tuesday. In the U.S., meanwhile, stocks sagged after unexpectedly weak reports on business activity in the Midwest and U.S. consumer confidence reignited concerns the fragile economic recovery may be at risk.

Despite a report Tuesday morning from Statistics Canada that the economy grew by 0.6% in July, twice the rate that economists had predicted, the Toronto Stock Exchange S&P/TSX composite index fell 24.49 points, or 0.33%, to close at 7,421.13. Toronto stocks were also hurt by an earnings warning from Sun Microsystems Inc. that hit technology issues hard, although the market’s heavy weighting of gold and resource issues helped mitigate the damage.

Telecoms equipment manufacturer Nortel Networks Corp. fell 22¢, or 3.8% to $5.55, while contract electronics manufacturer Celestica Inc. dropped $1.15, or 5%, to $21.30.

“The tech sector led markets up and now it’s proving vulnerable to profit-taking and that’s having a dampening effect across the board,” one trader to Reuters news agency. “But the TSX is still holding up pretty decently despite big drops in the United States, and that’s largely because of the diversity of the index.”

The information technology sector was off 2%, but a 1% gain by gold-mining issues and a 0.6% jump in the energy group helped offset the decline. Eight of the TSX’s 10 subindexes finished lower. Placer Dome Inc finished 39¢, or 2%, higher at $18.56, while Iamgold Corp. rose 18¢, or 2%, to $8.35.

The Venture Exchange closed at 1,393.15, up 9.87 points. The dollar gained 17 basis points at the Bank of Canada to close the day at US74.08¢.

In the U.S., the technology-laced Nasdaq composite index dropped 37.77 points, or 2.07% to 1,786.79, while the blue-chip Dow Jones industrial average lost 105.18 points, or 1.12%, to 9,275.06. The broader Standard & Poor’s 500 Index . fell 10.65 points, or 1.06%, to 995.93. Trading was brisk, with 1.5 billion shares traded on the New York Stock Exchange and 1.8 billion shares traded on Nasdaq.

A sour forecast from Sun Microsystems was viewed as a bad omen for the upcoming quarterly earnings season. The network computer maker’s stock spiraled about 14% lower and topped the Nasdaq’s most active list.

Two reports showing growth at Chicago-area businesses slowed sharply in September and U.S. consumer confidence plunged to the lowest level since the start of the Iraq war also put investors on guard.

“The data did spook people,” one U.S. trader told Reuter. “The market’s had a big move, and it’s now at the ‘show-me’ stage — show me sustainability — and, as yet, there’s no convincing evidence of it.”

Major stock market indexes fell in September, ending a string of monthly increases, but managed to end the third quarter higher.

The last day in September saw the end to a streak of monthly gains for the major market gauges. The Nasdaq fell roughly 1.3% for the month, snapping a 7-month streak of gains. The S&P 500 dropped 1.2% and the Dow fell about 1.5% for the month. Both broke a six-month string of gains.

For the quarter, the S&P 500 rose 2.2%, the Dow gained 3.2% and the Nasdaq Composite rose 10.1%.