(Adds details, quotes)
*Index takes back some losses but still ends lower
*Resources hit by profit-taking following run-up
By Leah Schnurr
TORONTO, May 23 (Reuters) - The Toronto Stock Exchange's main index trimmed some earlier losses but still ended lower on Friday, knocked down as investors locked in profits following the index's recent surge to record highs.
Resource shares stumbled even though oil and gold prices pushed higher. Potash Corp of Saskatchewan (POT.TO) was among the biggest decliners by weight, giving up C$2.40, or 1.2 percent, to C$194.40, while in the oil patch, Canadian Natural Resources (CNQ.TO) was down C$1.48, or 1.5 percent, at C$100.62.
The energy and materials sectors slid 0.6 percent and 0.5 percent respectively. The subindex of gold producers, which had managed to hold on to gains earlier in the week, dipped 0.1 percent. Barrick Gold (ABX.TO) was off 42 Canadian cents, or 1 percent, at C$41.53.
"I think we had a nice rally over the last two or three months, which has pulled back a little bit, (but) I think we've seen that happen globally," said Paul Harris, portfolio manager at Avenue Investment Management.
"Toronto has held in reasonably well because of oil and resources, as usual. That's really been the impetus that's helped it out over the last little while."
The S&P/TSX composite index .GSPTSE closed down 69.00 points, or 0.47 percent, at 14,723.36 with all but three of its 10 sectors dropping. It was down 1.7 percent for the week, which was shortened by the Victoria Day holiday on Monday.
The Toronto benchmark has climbed since late March, emboldened by red-hot commodity prices and optimism that the worst of the credit crunch fallout has been seen. The index vaulted over the 15,000 mark for the first time earlier in the week.
On the upside, the telecoms sector added 0.8 percent, helped in part by a bounce in shares of BCE Inc (BCE.TO) the day after a court decision put the future of its buyout in doubt and drove the stock down sharply. On Friday, BCE closed up 96 Canadian cents, or 2.9 percent, at C$33.60.
Shares of TSX Group (X.TO), owner of the Toronto Stock Exchange, lost C$1.71, or 3.8 percent, to C$43.09 amid doubts about its technology in the wake of a service problem on Thursday that prompted the exchange to halt shares of BCE. TSX is facing competition from new rivals.
Brian Pow, vice president, research and equity analyst at Acumen Capital Partners, in Calgary, said that the index was also taken lower by generally negative economic news throughout the week, including minutes from the U.S. Federal Reserve that indicated it will pause in its aggressive interest rate-cutting campaign.
"When you saw the strong run-up in oil and the strong performance on the resource side, I think people just painted the bad news over top of that, and said maybe we should be taking some profits for the week and see if we can sort this whole thing out," Pow said.
"The Fed drawing a firm line in the sand that there's no more interest rate cuts to come was something that the market did not want to hear."
Market volume was 356 million shares worth C$7.3 billion. Decliners outpaced advancers 788 to 774. The blue chip S&P/TSX 60 index .TSE60 closed down 4.42 points, or 0.5 percent, at 878.56.
In New York, stocks slumped amid worries over inflation in the wake of high oil prices. The Dow Jones industrial average .DJI was down 145.99 points, or 1.16 percent, at 12,479.63, while the Nasdaq Composite Index .IXIC slipped 19.91 points, or 0.81 percent, to 2,444.67. ($1=$0.99 Canadian) (Editing by Peter Galloway)