TORONTO (Reuters) - The Toronto Stock Exchange's main index tumbled almost 3 percent into bear-market territory on Wednesday amid worries over the U.S. financial crisis and as Nortel Networks Corp NT.TO slashed its revenue forecasts and said it was looking to sell one of its businesses.
The heavily weighted financial sector continued to slide amid persistent concerns over troubled U.S. insurer American International Group (AIG.N) and a series of Wall Street failures and takeovers.
"It does seem like there is a bit of panic selling here," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
"I think there's a message being sent by investors to the Federal Reserve and U.S. Treasury, even though it seems they have done a lot in terms of helping various organizations, the latest one being AIG, it's still not enough," Nakamoto said.
The S&P/TSX composite index .GSPTSE closed down 349.30 points, or 2.86 percent, at 11,877.69. A bear market is often defined as one that is down 20 percent from its high point. The index has fallen 22 percent since its June record high.
All but one of the TSX's 10 main groups ended in the red, including the key energy sector, which lost 1.3 percent despite gains in oil prices, and the heavyweight financials, off 5.1 percent.
Manulife Financial (MFC.TO) ended down 6.2 percent at C$33.76 after it said it will have unstipulated costs tied to AIG and to failed investment bank Lehman Brothers LEH.N.
Insurer Sun Life Financial (SLF.TO) fell 8.1 percent to C$35.77, hitting a new year low, after disclosing its securities holdings in AIG and AIG subsidiaries.
"Manulife and Sun (Life) have spelled out pretty much what their exposure is, but none of the Canadian banks have commented and they, of course, are being hit the hardest," said John Kinsey, portfolio manager at Caldwell Securities Ltd.
Nortel Networks dropped a whopping 51.8 percent to C$2.76 after it cut its revenue forecasts, prepared for a new wave of layoffs and said it was looking at selling one of its businesses.
The telecom equipment maker's slide helped drop the tech group down 12.6 percent.
A 2.1 percent rise in the resource-heavy materials group cushioned the composite's drop a bit as the price of gold jumped by over 10 percent on safe haven buying.
"Gold is the star of the day, it has just gone wild here," Kinsey said.
Oils were also among Bay Street's losers, with Canadian Natural Resources (CNQ.TO) down 3.8 percent at C$76.6 and Petro-Canada PCA.TO off 6.8 percent at $36.99.
However, oil prices shot up $6.01 to $97.16 a barrel after a U.S government report showed inventories shrinking.
Market volume was a heavy 733 million shares worth C$12.4 billion. Decliners outpaced advancers 1,116 to 505. The blue chip S&P/TSX 60 index .TSE60 closed 23.23 points lower, or 3.16 percent, at 711.02.
On Wall Street, stocks fell to a three-year low as the rescue plan for AIG failed to calm investor worries.
The Dow Jones industrial average .DJI plunged 449.36 points, or 4.1 percent, to 10,609.66, while the Nasdaq composite index .IXIC ended down 109.05 points, or nearly 4.9 percent, at 2,098.85.
Reporting by Natasha Elkington; Editing by Peter Galloway