* TSX falls 0.18 percent to 13,503.30
* Six of 10 main sectors decline, materials lead way
* Friday's U.S. nonfarm payrolls awaited
* Progress Energy stock jumps on C$1.07 bln deal (Updates to midday)
By Ka Yan Ng
TORONTO, June 2 (Reuters) - Toronto's main stock index turned lower on a reversal in the resource groups as caution about the global economy took the steam out of an early rally.
The index, which recorded a drop of nearly 2 percent on Wednesday -- its biggest one-day slide since Aug. 11 -- got a short-lived boost from its hefty energy and materials groups.
By midday, both sectors were well off the day's highs, with materials, down 0.86 percent, leading the slide after a wave of technical selling hit both gold and silver futures. [GOL/]
The energy sector was up 0.06 percent, having erased nearly all of its early gains. The retreat came as U.S. crude futures extended losses and moved below the 100-day moving average, reacting to a government report showing a surprise rise in U.S. crude stockpiles last week. [O/R]
Barrick Gold (ABX.TO) and Goldcorp (G.TO) were the biggest drags on the index, helping to send the gold subgroup down more than 1 percent. Barrick dropped 2.23 percent to C$45, while Goldcorp shed 1.33 percent to C$47.51.
Silver Wheaton SLW.TO slipped 2 percent to C$34.36, and Imperial Oil (IMO.TO) lost 1.6 percent to C$45.91.
At 12:30 p.m. (1630 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 24.58 points, or 0.18 percent, at 13,503.30. Six of the index's 10 main sectors were lower.
"It just speaks to the nervousness or the sense of uncertainty that investors currently feel," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.
"We haven't been able to post a sustainable rally for a few days now. I think the bears currently have the upper hand in the short term."
While new U.S. claims for unemployment benefits fell by 6,000 last week to a seasonally adjusted 422,000, the labor market by most accounts remains weak. The figure comes ahead of Friday's key U.S. nonfarm payrolls report for May. [ID:nOAT004815] [ID:nN31283560]
Recent data ranging from consumer spending to manufacturing has suggested the U.S. and other global powerhouse economies, are hitting a soft patch.
"There are more cracks opening up in the economic side, especially in the States. We've seen a clear deterioration in the numbers in the last few weeks," said Andrew Pyle, an associate portfolio manager at ScotiaMcLeod.
"Clearly, if the U.S. employment numbers are not good, then that's just going to be one more element of concern in the market."
Markets are already gearing up for a soft read on the U.S. labor market, confirming the economy's loss of momentum as it grapples with a raft of headwinds ranging from high energy prices and bad weather to supply chain disruptions due to the earthquake in Japan. [ID:nN31283560]
In individual company news, Laurentian Bank LB.TO fell 3.56 percent to C$49.81 after it reported stronger results but missed expectations. [ID:nN02247242]
Progress Energy (PRQ.TO) jumped 4.43 percent to C$14.60 after it said it will sell half its working interest in a North Montney joint venture to Malaysia's state oil firm Petronas for C$1.07 billion to develop its large shale assets in British Columbia. [ID:nL3E7H21VB]
($1=$0.98 Canadian) (Reporting by Ka Yan Ng; editing by Rob Wilson)