* TSX falls 85.52 points, or 0.68 pct, to 12,426.52
* Nine of 10 main sectors lower
* U.S. durable goods data hits commodity prices
* Market reacts to Ontario budget
By Jennifer Kwan
TORONTO, March 28 (Reuters) - Canada's main stock index sank on Wednesday as resource shares were hit by softer underlying commodity prices and as investors reacted to the Ontario budget released the day before.
A mix of resource names led the index lower, including Suncor Energy Inc, down 0.6 percent at C$32.67, and Cenovus Energy Inc, which fell 2 percent to C$35.55. Barrick Gold Corp sank 1 percent to C$43.22, while Teck Resources Ltd dropped 2 percent to C$35.02.
The key pillars of energy and materials, which comprise some 40 percent of the broader index, sank 1.1 percent and 1.2 percent, respectively, as oil prices fell for a second session on Wednesday on the possibility of a release of strategic oil reserves by the United States and some European nations.
Copper prices fell in part as weaker-than-expected U.S. durable goods data cast doubt on the pace of recovery in the world's biggest economy. The data weighed on investor confidence and on the outlook for base metals demand. Bullion prices fell as well.
New orders for U.S. manufactured goods rose less than expected in February and a gauge of future business investment also fell short of forecasts, the Commerce Department said.
"The only real economic news was the durable goods orders from the United States. They may have been a tick lower than what people expected," said David Baskin, portfolio manager and president of Baskin Financial Services. The Toronto market was hit harder than U.S. indices given the make up of resource sectors, he added.
At 10:20 a.m. (1420 GMT), the Toronto Stock Exchange's S&P/TSX composite index sank 85.52 points, or 0.68 percent, to 12,426.52. Nine of its 10 main sectors were lower. Telcoms were up 0.4 percent.
Baskin also said the market reflected investor disappointment with Tuesday's Ontario budget.
The province's minority Liberal government put corporate tax cuts on hold and pledged a renewed effort to rein in public sector labor costs in an austerity budget designed to eliminate the deficit in six years and convince rating agencies the province is fiscally sound.
Canada's most populous province accounts for about 40 percent of the country's economy.
"The Ontario government has reneged on its pledge to lower corporate taxes. That affects many, many TSX-listed companies simply because all of them do business in Ontario," said Baskin.
"If taxes are going to be higher, then profits are going to be lower."
In domestic economic news, Canadian home resale prices rose in January from December, snapping two straight monthly declines, as price gains were registered in seven of 11 metropolitan markets, the Teranet-National Bank Composite House Price Index showed on Wednesday.
Canadian police confirmed on Tuesday they are investigating engineering firm SNC-Lavalin Group Inc, down 3.6 percent at C$40.20, after an internal company probe found $56 million in mysterious payments that were wrongly assigned to certain construction projects.