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TORONTO, Jan 17 (Reuters) - The Toronto Stock Exchange's main index retreated after earlier gains on Thursday, slipping into negative territory as materials shares, led by Potash Corp of Saskatchewan (POT.TO), tumbled.
The S&P/TSX composite index .GSPTSE fell 58.62 points, or 0.45 percent, to 13,016.24 in morning trading, mirroring a reversal in U.S. stock markets.
The index had earlier risen more than 100 points, raising hopes after the past two trading days saw it lose 623 points, or 4.6 percent, on worries of a U.S. recession and as commodities tumbled on the prospect of softening demand.
Firm commodity prices gave the resource-heavy index a boost in early action, but U.S. crude oil prices reversed course in later trade, bringing the TSX energy sector down 0.5 percent. U.S. crude futures were down 0.3 percent at $90.56 a barrel.
The sharpest retreat was in the materials sector, which rose shortly after the market opened but appeared to react to a U.S. report that showed a worse-than-expected reduction in regional factory activity.
The sector slid 2.1 percent with fertilizer maker Potash Corp the biggest loser by far, off C$13.29 at C$124.61. The firm is in the TSX's top 10 by weighting, and has fallen steeply over the last two days.
Eyes were also on U.S. Federal Reserve Chairman Ben Bernanke, who told the House of Representatives Budget Committee a fiscal stimulus package would help policymakers' efforts to ward off a U.S. recession.
"It's not new news at this stage that if it's not a recession, it could be quite a severe slowdown in the United States," said Mario Richard, senior portfolio strategist at Sceptre Investment Counsel.
"The market has probably already discounted quite a significant slowdown in the United States."
On the upside, gold companies added 1.6 percent, with Barrick Gold (ABX.TO), the world's biggest gold producer, up C$1.55 at C$50.07. ($1=$1.03 Canadian) (Reporting by Jonathan Spicer; Editing by Bernadette Baum)