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*TSX index rallies late after big early sell-off
*Financial, consumers stock rebound after recent losses
*Materials issues weigh on the market.
TORONTO, July 3 (Reuters) - The Toronto Stock Exchange's main index rallied from early weakness to close more than 100 points higher on Thursday, as investors scooped up hard-hit financial and consumer shares after data showing the U.S. labor market was holding up better than some had expected.
Following a steep, 400-point drop in the previous session, investors sought bargains among stocks that been hit hardest by worries about credit conditions and broader economic weakness.
The heavily-weighted financial issues sector, which has dropped 11 percent in the past two months, rose 2.51 percent during Thursday's session, led by Canadian Imperial Bank of Commerce (CM.TO) and Bank of Montreal (BMO.TO).
"I think some people are slowly wading back in there, seeing if they can get some deep discounts on some of the financials" said Andrew Martyn, portfolio manager at Davis Rea.
The S&P/TSX composite index .GSPTSE rose 109.46 points, or 0.78 percent, to close at 14,143.57.
The financial sector was helped by a U.S. Labor Department report that showed employers cut a net 62,000 jobs in June, roughly in line with expectations. Even so, many had feared the jobs market had deteriorated even more.
Martyn said comments from the European Central Bank suggesting a less aggressive tone on interest rate increases helped support Toronto stocks.
CIBC rose C$2.10, or 3.8 percent, to C$57.42, while BMO climbed C$1.57, or 3.8 percent, to C$42.99.
The sector's rise was its biggest since a 3.28 percent rise on March 31.
Seven of the ten TSX subgroups rose. Consumer discretionary issues rose 1.70 percent, and consumer staples climbed 1.46 percent.
Analysts said thin volumes contributed to the volatility of the market, as many market players stayed home during a holiday-shortened week. The index was down as much as 347 points early in the session.
Canadian markets were closed on Tuesday for Canada Day, while U.S. markets closed early on Thursday and will remain shut on Friday for Independence Day.
$1=$1.02 Canadian Reporting by Cameron French; Editing by Frank McGurty