January 21, 2008 / 5:44 PM / in 10 years

UPDATE 3-Toronto stocks in biggest intraday drop since 2001

(Adds details)

By Scott Anderson and Jonathan Spicer

TORONTO, Jan 21 (Reuters) - Canada’s main stock market index plunged to its lowest level in more than 14 months on Monday, following a rout in overseas markets, as persisting worries over the wellbeing of the U.S. economy sent investors running for the doors.

By early afternoon, the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 553.73 points, or 4.35 percent, at 12,183.39. Earlier in the session, it had fallen as much as 617 points.

It represents the biggest intraday plunge since Feb. 16, 2001, when the benchmark dropped 625 points, or nearly 7 percent, after tech giant Nortel Networks NT.TO cut its revenue forecast in half and announced mass layoffs.

The TSX followed world markets lower as investors doubted an economic stimulus package unveiled late last week by U.S. President George W. Bush would be enough to shore up the world’s largest economy, which has been battered by the housing crisis and credit crunch.

“This is definitely a sign of evacuation in investor confidence, warranted or not, and will put even more pressure on central banks to respond with rate cuts,” Andrew Pyle, an investment executive at ScotiaMcLeod, said in a note.

The closely watched U.S. markets were closed for the Martin Luther King Day holiday. The United States is Canada’s biggest trading partner, and any slowdown there would hit the profits of Canadian corporations.

Every one of the TSX index’s main groups fell, led by a 5.9 percent drop in the materials sector and a 5.1 percent fall by energy shares. The heavily weighted financial group tumbled 3.4 percent.

The commodity-heavy materials index plunged as investors fretted that a possible U.S. slowdown would slash demand for base metals.

Meanwhile, energy issues retreated as the price of U.S. crude oil dropped $1.75 to $88.82 a barrel. Natural gas futures were also lower.

“It’s pretty ugly, but we’re just following the global pattern,” said Paul Hand, managing director at RBC Capital Markets. “It’s all fears of more financial stress given the model lines and the overlay of a potential recession.”

Fifteen of the top 25 net loss leaders were all commodity-based issues, with oil sands developer Suncor Energy (SU.TO) down C$5.14 at C$87.70, fertilizer producer Potash Corp (POT.TO) off C$6.70 at C$118.80, and Goldcorp (G.TO) down C$2.39 at C$33.01.

Financials, which make up about 30 percent of the TSX’s overall weighting, were led lower by the big banks.

Royal Bank of Canada (RY.TO) dropped C$1.52 to C$46.19 and Toronto-Dominion Bank (TD.TO) fell C$2.44 to C$62.25.

With the drop, the TSX financial services index had wiped out all of its gains over the last 1-1/2 years.

“I think we may be into panic selling here and I don’t know if we’re at the bottom yet, but we have got to be getting close to it,” said Rick Hutcheon, president and chief operating officer at RKH Investments.

“There is evidence that we are getting a little carried away with ourselves here.”

Meanwhile Quebecor World Inc IQW.TO shares slipped 15 Canadian cents to 18 Canadian cents after the beleaguered commercial printer said it will file for creditor protection. For details, see: [nN21404364]

$1=$1.03 Canadian Additional reporting by Leah Schnurr; editing by Rob Wilson

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