TORONTO, July 8 (Reuters) - Toronto stocks were set to drop again after suffering a steep decline the previous session on Tuesday as concerns over the health of global financial markets and falling oil prices weigh on the resource-heavy market.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE begins the day at 13,712.80 after dropping more than 2 percent on Monday, knocked lower by weak resources and a bleak economic outlook.
The benchmark index has fallen 9.5 percent from the record high it reached at the beginning of June, putting it close to an official correction, defined as a 10 percent decline from its peak.
The index's heavily weighted financial group could feel the brunt of the decline on Tuesday after Wachovia Corp WB.N analysts said Merrill Lynch MER.N could take about about $5 billion in second-quarter write-downs and may need another capital infusion.
"It was an ugly day across the board and there are expectations for more of the same today," said John Ing, president at Maison Placements Canada. "There are credit woes in the states and all of it is contributing to a soft market."
Comments from U.S. Federal Reserve Chairman Ben Bernanke could take the edge off the financial jitters. The Fed chief said the central bank may extend emergency lending for big Wall Street investment banks in an effort to shore up confidence in the financial system.
Falling oil prices could also weigh on the resource-heavy market as the price for U.S. crude oil dived 1.9 percent to $138.67 a barrel as concerns over a major hurricane in the U.S. Gulf region diminished.
Jean Coutu Group Inc (PJCa.TO) could generate active trading after it said its quarterly loss widened, but the results were in line with analyst expectations after accounting for the sale of its Brooks and Eckerd drugstore chain to Rite Aid Corp last year.
WestJet Airlines (WJA.TO) is another stock to watch after it said it signed a code-sharing agreement with Southwest Airlines (LUV.N) for WestJet's Canadian and transborder flights. ($1=$1.02 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)