TORONTO (Reuters) - A late day retreat pulled the Toronto Stock Exchange's main index into an official correction on Wednesday, as it dropped almost 200 points amid worries over the economic outlook and weaker second-quarter results.
The large financial sector was down 2.8 percent as persistent worries spilled over from the United States on further impact from the credit crunch.
Energy shares, which had earlier helped lift the main index, retreated as the price of oil cut gains to settle just a penny higher after climbing more than $2.
Rick Hutcheon, president and chief operating officer at RKH Investments, said that results for the second quarter are expected to be weak, but if they come in better than expected, the market could stage a rally.
"I think we're going to be on tenterhooks until we get a little further into the earnings season," said Hutcheon.
The S&P/TSX composite index .GSPTSE closed down 198.93 points, or 1.44 percent, at 13,610.84, with all but one of its 10 main sectors in a downturn.
The index has tumbled 10.2 percent from the life high reached in the beginning of June, putting it in the general definition of a correction -- usually seen as a 10 percent fall from the peak level.
The benchmark swung in a wide range during the choppy session, climbing as high as 13,981.17.
Among laggards in the oil patch, Canadian Natural Resources (CNQ.TO) was down C$3.12, or 3.5 percent, at C$85.76, and EnCana (ECA.TO) was off C$2.72, or 3.2 percent, at C$81.18. The sector overall lost 1.4 percent.
Banks around the world have felt the impact of the credit crunch, although Canadian institutions are generally seen as being better off than their U.S. counterparts.
"We just have to wait for the system to clean itself up," said Sal Masionis, stockbroker at Brant Securities.
Consumer stocks also took a beating amid concerns over a dampened appetite for spending in the face of soaring energy prices. Shoppers Drug Mart SC.TO was down C$1.47, or 2.7 percent, at C$52.70, while dairy products maker Saputo (SAP.TO) eased C$1.18, or 4.2 percent, to C$27.07.
Research In Motion RIM.TO skidded C$5.05, or 4.1 percent, to C$118.70, helping the small tech sector stumble 2.8 percent.
Market volume was 363 million shares worth C$7.4 billion. Decliners outpaced advancers 841 to 697. The blue chip S&P/TSX 60 index .TSE60 closed down 14.65 points, or 1.77 percent, at 813.48.
On Wall Street, stocks were battered by credit loss worries, as well as falling tech shares after Cisco Systems' (CSCO.O) chief executive raised fears of a prolonged U.S. economic downturn.
The Dow Jones industrial average .DJI closed down 236.77 points, or 2.08 percent, at 11,147.44, and the Nasdaq composite index .IXIC slid 59.55 points, or 2.6 percent, 2,234.89.
Editing by Rob Wilson