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*TSX ends lower after choppy session
*Financials knocked down by credit crunch woes
*Resources remain higher as commodities rally
By Leah Schnurr
TORONTO, July 11 (Reuters) - The Toronto Stock Exchange's main index ended a choppy session lower on Friday as its financial sector dropped sharply on fears of more casualties from the credit crunch.
Worries that U.S. mortgage finance giants Fannie Mae FNM.N and Freddie Mac FRE.N might run short of capital amid the spreading housing crisis rattled markets around the world, and helped take 2.2 percent off Toronto's financial sector.
Overall uneasiness about the economic picture spurred broad losses elsewhere, and the index's big energy and materials sectors were the only two groups to hold onto gains as they benefited from rallying commodity prices.
The S&P/TSX composite index .GSPTSE closed down 34.78 points, or 0.25 percent, at 13,709.10, after hitting a high of 13,859.93 earlier in the session.
The benchmark is down 2.2 percent for the week, buckling under the weight of continuing economic and credit fears.
It finished just above official correction territory on Friday, down 9.5 percent from the record high reached in early June. An official correction is defined as a drop of 10 percent from peak levels.
Francis Campeau, broker at MF Global Canada in Montreal, noted that despite its recent tumble, the Canadian market is still better off than most of its counterparts around the world and has been helped by its heavy weighting in resources.
"On the Canadian perspective, I think today was quite positive," Campeau said. "Although the numbers are down, we're not down that much if you look at other markets."
Oil hit a new peak above $147 a barrel amid worries over supply threats, and lifted the Toronto energy sector 0.6 percent. Canadian Natural Resources (CNQ.TO) rose C$3.35, or 3.8 percent, to C$92.50, and Suncor Energy (SU.TO) added C$1.93, or 3.3 percent, to C$60.82.
Gold producers also helped put a floor to the market as bullion rallied to a four-month high as the U.S. dollar sagged. Barrick Gold (ABX.TO) was up C$2.81, or 6 percent, at C$50.00, and Goldcorp (G.TO) jumped C$2.66, or 5.7 percent, to C$49.00. The materials group as a whole rose 2.9 percent.
Record high oil prices battered industrial and consumer shares, as investors worried about the appetite for business and personal spending in the face of increased energy costs.
The industrials sector was down 1.9 percent, while the consumer discretionary group fell 1 percent.
Shares of Air Canada ACa.TO took a beating as oil prices continued to soar. Air Canada closed down 89 Canadian cents, or 15.1 percent, at C$5.01, and has plunged 64 percent over the past 12 months.
"The high price of oil hits everybody but the oil producers," said Douglas Davis, president at Davis-Rea.
Market volume was 375 million shares worth C$8.2 billion. Decliners outpaced advancers 958 to 585. The blue chip S&P/TSX 60 index .TSE60 closed down 2.07 points, or 0.25 percent, at 819.73.
On Wall Street, stocks were shaken by worries over the stability of Fannie and Freddie, while record high oil added pessimism to the economic outlook.
The Dow Jones industrial average .DJI closed down 128.48 points, or 1.14 percent, at 11,100.54, and the Nasdaq Composite Index .IXIC was off 18.77 points, or 0.83 percent, at 2,239.08. ($1=$1.01 Canadian) (Editing by Peter Galloway)