* TSX reverses earlier gains, drops 1.25 pct
* Energy sector unwinds gains, falls 2.6 percent
* Equity markets sag as U.S. bank plan unveiled (Updates to midday, adds details, quotes)
TORONTO, Feb 10 (Reuters) - Toronto’s main stock index fell more than 1 percent by midday on Tuesday as oil and gas issues unwound early gains and caution over the U.S. bank rescue plan dragged down the big financial services sector.
The heavily weighted financials group fell 3.1 percent, tumbling along with markets in the United States which retreated on caution over Washington’s plan to shore up the troubled U.S. banking sector, unveiled on Tuesday [ID:nN102559].
The energy sector, down 2.6 percent, also helped to weigh down the resource-laden TSX as oil slipped below $39 a barrel on concerns about weak fuel demand. [ID:nSYD426207]
“The market is just tracking Wall Street,” said Fergal Smith, managing market strategist at Action Economics.
The U.S. Treasury unveiled a revamped financial rescue plan on Tuesday morning to cleanse billions in spoiled assets from banks’ books. [ID:nN102559] [ID:nN26365728]
In the U.S., stock market indexes slid more than 3 percent immediately following Treasury Secretary Timothy Geithner’s announcement.
Analysts said investors were worried the plan might not do enough to offset the financial crisis. [ID:nN10291807]
“A large part of that is that the Geithner speech, while it carried all the ingredients that were telegraphed in advance, there wasn’t much of the details the market had been hoping for,” said Smith.
He added that the market may also be “correcting some of its recent advance” in anticipation of the plan. The Toronto index has finished higher for the past five sessions.
At 12:33 p.m. (1733 GMT), the S&P/TSX composite index .GSPTSE was down 113.24 points, or 1.25 percent, at 8,934.04, with nine of its 10 main groups lower. Earlier, the index was ahead 0.7 percent.
The resource-laden materials group was the only sector in the black, climbing 2.5 percent with help of rising gold prices.
$1=$1.23 Canadian Reporting by Jennifer Kwan; editing by Rob Wilson