July 23, 2008 / 9:11 PM / 9 years ago

UPDATE 2-Weak resources drag Toronto stocks lower

(Updates closing numbers, adds details)

* TSX closes lower for second session in row

* Resources weigh as commodity prices sag

* Financials follow U.S. bank stocks higher

TORONTO, July 23 (Reuters) - The Toronto Stock Exchange's main index tumbled for a second session in a row on Wednesday, knocked 130 points lower as resource issues fell along with commodity prices.

The materials sector led the way down as shares of gold producers were battered by a 3 percent drop in bullion prices while the U.S. dollar rose.

A six-week low in the price of oil dragged down the heavyweight energy sector as crude fell $4 as a U.S. government report highlighted worries of softening U.S. demand. Oil settled at $124.44 a barrel.

Energy producers, miners and fertilizer firms were among the TSX's biggest laggards.

Potash Corp of Saskatchewan (POT.TO) topping the net losers with a drop of C$15.37, or 7.1 percent, to C$202.23. Workers at three mines gave the company notice that they will be in a legal strike position as of 3 p.m. ET (1900 GMT) on Friday.

The S&P/TSX composite index .GSPTSE closed down 130.53 points, or 0.96 percent, at 13,512.66 with four of its 10 main sectors lower.

The energy and materials sectors were responsible for the lion's share of the losses, giving up 3.8 percent and 5.6 percent respectively.

Canadian Natural Resources (CNQ.TO), fell C$5.41, or 6.3 percent, to C$80.28, while Barrick Gold (ABX.TO) was down C$3.82, or 7.9 percent, at C$44.30.

A 3.4 percent gain by financials cushioned the fall as Canadian banks were lifted by a rally in bank stocks south of the border and by optimism that U.S. lawmakers would approve a rescue plan for mortgage finance giants Fannie Mae FNM.N and Freddie Mac FRE.N.

Canadian Imperial Bank of Commerce (CM.TO) rose C$3.17, or 5.3 percent, to C$63.29, and Bank of Montreal (BMO.TO) was up C$2.52, or 5.3 percent, at C$49.82.

Keith Summers, chief investment officer at Stonegate Private Counsel, said that optimism over U.S. steps being taken to contain the impact of the credit crunch had helped put a floor under the Canadian banking sector.

"Now they're recovering back to where they should be," said Summers. "It won't happen right away, but I think the momentum is favoring financials right now and not favoring commodities." ($1=$1.01 Canadian) (Reporting by Leah Schnurr; editing by Rob Wilson)

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