(Adds details, quotes)
* Index gives up early gains to end 0.6 percent lower
* Energy shares lead retreat as oil price tumbles
* Lululemon falls after cutting profit forecast
By Leah Schnurr
TORONTO, June 3 (Reuters) - The Toronto Stock Exchange's main index erased early gains to close lower after a roller-coaster session on Tuesday as energy and gold-mining issues fell as commodity prices dropped.
After climbing more than 100 points, the Toronto benchmark turned sharply lower as the energy sector retreated with slumping oil prices.
Crude gave way after U.S. Federal Reserve Chairman Ben Bernanke warned about the inflationary risk of a weak U.S. dollar. Those remarks gave a boost to the greenback and knocked oil down $3.45, or 2.7 percent, to $124.31 a barrel.
Suncor Energy (SU.TO) fell C$2.18, or 3.2 percent, to C$66.60, while Canadian Oil Sands Trust COS_u.TO slid C$1.55, or 3 percent, to C$49.60. The sector was down 1.4 percent.
"I'd say it comes back to the U.S. dollar," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier. "Commodities are part of the effect of the stronger or weaker U.S. dollar."
The S&P/TSX composite index .GSPTSE closed down 85.57 points, or 0.58 percent, at 14,728.61 with all but two of its 10 main sectors on the downside. During the course of the day, the benchmark swung more than 100 points both higher and lower.
Shares of gold producers dropped as the price of bullion fell in the face of the stronger U.S. dollar. The subindex gave up 1.5 percent, with Goldcorp (G.TO) off 90 Canadian cents, or 2.2 percent, at C$39.83.
But fertilizer company Potash Corp of Saskatchewan (POT.TO) helped the larger materials sector post a gain of 0.4 percent. Potash rose C$9.93, or 4.9 percent, to C$213.30.
Brian Pow, vice president, research and equity analyst at Acumen Capital Partners, in Calgary, said stocks were also hurt by Bernanke's signal that the Fed will probably not continue with its campaign of aggressively cutting interest rates.
"Bernanke's comments were something the market didn't want to hear," Pow said. He added that while the comments had already been out in the market, "when Bernanke confirmed it in his speech, that set it with most people."
In the retail sector, shares of Lululemon Athletica LLL.TO dropped C$2.04, or 6.3 percent, to C$30.60 a day after it trimmed its profit forecast for the rest of the year.
The small healthcare sector was the other group to stay on the upside, helped by Biovail Corp BVF.TO, which rose 12 Canadian cents, or 1 percent, to C$11.79. The drugmaker urged shareholders to dismiss a dissident proxy circular from Eugene Melnyk, the company's founder and biggest shareholder. The sector rose 0.8 percent.
As for the day's wide swings, Nakamoto said there are a lot of investors who want to take profits quickly.
"So when there's a reversal in the fortune of shares, especially shares that have done well like energy, the tendency is to sell first and ask questions second," Nakamoto said.
Market volume was 342 million shares worth C$7.1 billion. Decliners outpaced advancers 882 to 701. The blue chip S&P/TSX 60 index .TSE60 closed down 5.58 points, or 0.63 percent, at 878.24.
In New York, stocks were taken lower by more worries about more fallout from the credit crunch after a report that U.S. investment bank Lehman Brothers LEH.N may have to raise more capital.
The Dow Jones industrial average .DJI closed down 100.97 points, or 0.81 percent, at 12,402.85, while the Nasdaq Composite Index .IXIC was also lower, down 11.05 points, or 0.44 percent, at 2,480.48. ($1=$1.01 Canadian) (Editing by Peter Galloway)