UPDATE 3-Banks, Canadian Tire drag Toronto stocks lower

Thu Aug 7, 2008 5:51pm EDT
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(Adds details, quotes)

* TSX index falls as financials hit by credit crunch fears

* Canadian Tire down after cuts earnings forecast

* Energy sector gains along with oil

By Leah Schnurr

TORONTO, Aug 7 (Reuters) - The Toronto Stock Exchange's main index finished lower on Thursday in a broad decline sparked by losses in the financial-services sector on nagging worries over more fallout from the credit crunch.

Canadian Tire (CTCa.TO: Quote) was the biggest drag on the index after it reported a lower quarterly profit and cut its earnings forecast for the year. Shares of the country's largest auto parts and household goods retailer shed 7.7 percent.

Among financials, Manulife Financial MFC.TO lost 3.7 percent after it said its profit fell, hurt by weak equity markets, a stronger Canadian dollar and tax-related provisions.

Banks got caught up by rising fears of more fallout from the U.S. credit crisis as insurer American International Group (AIG.N: Quote) reported a big loss after more writedowns.   Continued...