Stocks stung by U.S. bailout uncertainty

Mon Sep 22, 2008 5:19pm EDT
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By Leah Schnurr

TORONTO (Reuters) - The Toronto Stock Exchange's main index tumbled more than 2 percent in choppy action on Monday in a broad retreat on uncertainty over the effectiveness of the proposed $700 billion U.S. financial bailout plan.

The lone group to make gains was the materials sector, pushed up by gold producers as bullion prices rose on the commodity's safe-haven allure and the weaker U.S. dollar. Among gainers, Goldcorp (G.TO: Quote) was up 9.8 percent at C$37.89.

But the broader market was rattled by concerns over how much the U.S. government's plan to take over sour mortgage-related debt from financial groups will help financial markets in the long term, analysts said, as well as uncertainty over the details of the plan.

In Toronto, the financial sector was down 3.7 percent, while Bank of Montreal (BMO.TO: Quote) fell 4.8 percent to C$47.53.

"I don't know if anyone's really grasped what this means, what the implications are, (and) what the long term solutions are, if any," said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc, in Vancouver.

The S&P/TSX composite index .GSPTSE closed down 274.92 points, or 2.13 percent, at 12,638.07 with all but one of its 10 main sectors in a downturn.

The selloff comes after a stunning hike of more than 800 points on Friday on optimism over the U.S.-led moves to shore up the financial system, as well as a rally in commodities.

But by Monday some of the luster had worn off as investors worried about the outcome of the U.S. proposal.   Continued...

<p>A sign shows TSX information in Toronto September 15, 2008. REUTERS/Mark Blinch</p>