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* Stronger financials overcome commodity groups
* Outlook upbeat for banks, insurers
* Federal budget due after markets close
TORONTO, Jan 27 (Reuters) - Toronto's main stock index climbed nearly 1 percent on Tuesday afternoon in a broad rally led by stronger financial issues, which overcame the drag from heavily weighted commodity groups.
The sector gained 2.6 percent, partly on hopes that the federal budget, due after market close, would contain measures to ensure further stability in the financial system.
"There is widespread expectation it may have some fairly stimulative measures and that is helping financials," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver.
"Anything that is perceived to be good for the economy or that could lessen the impact of the recession would help the market in general and financials in particular."
The minority Conservative government is set to present plans to deal with the global economic crisis, and is expected to earmark money for infrastructure spending and aid to struggling industries such as lumber. [ID:nN23482302]
At 1:23 p.m. (1823 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was up 79.46 points, or 0.92 percent, at 8,735.97. Eight of the index's 10 main groups were higher.
The resource sectors, which account for about 40 percent of the index's weighting, were under pressure from underlying commodity prices as the price of oil fell towards $43 a barrel ahead of U.S. inventory data. Gold held near $900 an ounce as investors took profits after the last session's gains.
The energy group fell 0.4 percent and materials dropped 0.8 percent.
"Commodities are weaker on continued concern that we're no where near the bottom of the economic trough, and we're a commodity-biased equity market. We trade with commodities," said Paul Taylor, chief investment officer at BMO Harris Investment Management.
Among the key decliners were Canadian Natural Resources (CNQ.TO), down 1.2 percent at C$44.75, and Suncor Energy (SU.TO), which slid 2.1 percent to C$23.77. Kinross Gold (K.TO) fell 2 percent to C$21.06.
$1=$1.23 Canadian Reporting by Ka Yan Ng and Jennifer Kwan; editing by Rob Wilson