TSX falls hard on oil price, profit-taking

By Ka Yan Ng

TORONTO (Reuters) - Toronto's main stock index dropped 3.7 percent on Wednesday as oil and gold shares slid with commodity prices and profit-taking set in after six sessions of gains.

Startling job losses in the United States and a warning from tech bellwether Intel Corp (INTC.O: Quote) added to the gloomy investor sentiment and heightened fears of an extended recession.

The energy sector slid 6.14 percent as the price of oil slumped nearly $6 a barrel to settle at $42.63 after a U.S. government inventory report showed supplies rose more than expected. Canadian Natural Resources (CNQ.TO: Quote), the index's biggest mover, fell 8.3 percent to C$51.32. EnCana (ECA.TO: Quote) lost 5 percent to C$57.80.

"Oil by far was the biggest negative. People were looking for inventories to build, but they built a lot more than expectations and that's why the price of oil has come down," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

"But the price of oil has rallied a fair bit also in the last two or three weeks."

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished down 3.7 percent, or 350.77 points, at 9,121.32. All 10 main groups were in the red.

The index was ripe for a selloff after six consecutive sessions of strong gains. The heavyweight groups, energy, financials and materials, have enjoyed strong gains since the end of 2008, and the momentum helped lift the overall index to a two-month high in the first few trading days of 2009.

"We basically rallied 13 percent in six consecutive sessions, so a bit of pullback and profit-taking is normal -- and a good breather," said Francis Campeau, a broker at MF Global Canada in Montreal.