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*U.S. Senate approval of bailout fails to lift TSX
*Potash, Agrium tumble after Merrill Lynch downgrade
*Energy sector falls 5.8 percent as oil slides below $96
TORONTO, Oct 2 (Reuters) - The Toronto Stock Exchange's main index fell more than 500 points on Thursday after a brokerage chopped its ratings on two fertilizer stocks that had powered the market during the commodities boom, while oil and gold prices also sank.
Potash Corp of Saskatchewan (POT.TO) dropped 24 percent and Agrium Inc (AGU.TO) more than 22 percent after Merrill Lynch downgraded the issues because of what it said was an uncertain earnings outlook for the sector. [ID:nN02254052].
The hefty materials sector, which includes fertilizer companies, led the market down, tumbling 11.1 percent.
The energy sector also slid 5.8 percent as oil retreated below $96 a barrel on persistent concerns over weakening fuel demand in a cooling global economy. [ID:nSP360782] The U.S. Senate's passage of a financial rescue plan failed to dispel those worries.
Gold futures tumbled more than 3 percent as the U.S. dollar strengthened. Barrick Gold (ABX.TO) tumbled 7.5 percent to C$36.80.
Shortly before 10:30 a.m., the S&P/TSX composite index .GSPTSE was down 560.23 points, or 4.78 percent, at 11,154.28, with all of its 10 main groups lower.
The financial services sector fell 2.3 percent with Toronto-Dominion Bank (TD.TO) down 2.7 percent at C$60.98.
The fate of the rescue plan, aimed at allowing the U.S. Treasury to mop up bad mortgage-related assets from financial institutions, rests with the House of Representatives.
The House, which rejected the bill on Monday, is expected to vote on the bill on Friday. [ID:nSP164112]
Potash Corp fell to C$103.66, while Agrium dropped to C$45.45 after the Merrill Lynch downgrade on the sector in the wake of disappointing earnings from Mosaic Co (MOS.N). ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; Editing by Frank McGurty)