CANADA STOCKS-TSX turns lower as banks swallow early gain

Fri Jan 16, 2009 11:45am EST
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* TSX unravels after 1.8 percent surge at open

* Higher commodity prices help to cushion slide

* Boost from Bank of America aid fades quickly (Adds details)

By Frank Pingue

TORONTO, Jan 16 (Reuters) - Toronto's main stock index was knocked lower late on Friday morning as a slide in the heavyweight financial sector more than offset a rally in the energy and materials groups.

Financial shares , which rose 2 percent early in the session on news that Bank of America (BAC.N: Quote) will get aid from the U.S. government, were down 2 percent late in the morning as the market judged the bailout was not enough to overshadow signs of more fallout from the credit crisis for the financial sector.

Higher prices for gold and oil helped to power gains in the energy and materials sectors, which together account for about 40 percent of the overall index and managed to cushion the TSX's slide. The materials group was up 1.9 percent and the energy was up 0.67 percent.

Among the key stocks behind the market's fall were Bank of Nova Scotia (BNS.TO: Quote), down 4.5 percent at C$29.94, and Toronto-Dominion Bank (TD.TO: Quote), down 3.5 percent at C$42.53.

Also weighing on the banking sector was news that Royal Bank of Canada (RY.TO: Quote), TD Bank and Laurentian Bank of Canada (LB.TO: Quote) were all downgraded by Dundee Securities.   Continued...