* TSX falls 41.26 points, or 0.33 percent, at 12,499.55 * Eight of 10 main index sectors decline * Materials down 0.97 pct, energy off 0.65 pct By Solarina Ho TORONTO, Jan 7 (Reuters) - Canada's main stock index retreated on Monday as mining stocks were pressured by softer gold prices and investors braced for the upcoming U.S. fourth-quarter earnings season. The Toronto Stock Exchange's S&P/TSX composite index's fall tracked declines on U.S. stock markets as cautious investors cashed in recent gains ahead of the earnings season. The U.S results are expected to be only marginally stronger than the previous quarter's lackluster performance. "We're in earnings season in the U.S. That might cause some kind of hesitation," said Michael Gayed, chief investment strategist at Pension Partners. Gold prices slipped as investors eyed the outlook for U.S. budget talks and the U.S. Federal Reserve's quantitative easing program. Two top Fed officials suggested on Friday the central bank may halt its bullion-friendly asset purchases by the end of the year due to an improving economy. The Toronto index's materials group, where miners reside, finished 0.97 percent lower. "There's going to be some kind of noise near term, most of it due to the concern about the (U.S. budget) debt ceiling coming up. That's going to cause some near-term back and forth movement," Gayed said. The index's energy group gave back 0.65 percent as oil prices steadied after retreating earlier in the session. TD Securities downgraded several Canadian oil and gas companies. The S&P/TSX composite index finished down 41.26 points, or 0.33 percent, at 12,499.55. Eight of its 10 main sectors fell. Barrick Gold Corp was the biggest drag, falling 1.67 percent to close at C$33.57, while Suncor Energy Inc slipped 1.04 percent to C$33.23. Goldcorp Inc rounded off the top three negative weights on the index, giving back 1.76 percent to C$34.69. Canadian Natural Resources was down 1.23 percent at C$29.78, while fellow oil producer Talisman Energy Inc was off 2.27 percent at C$11.62. TD Securities cut its rating on both companies. Toronto's resource-heavy market pared some of the robust gains it made made the previous week, when the index hit a nine-month high after the landmark U.S. budget deal. "The markets are coming off a hangover of feeling good from last week," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services. "Until we get a good feel on the fourth-quarter earnings and the guidance for first-quarter earnings, the market will probably trade sideways," he added. Investors were also taking in news that global regulators gave banks four more years and greater flexibility to build up cash buffers. The financial sector, the index's biggest, slid 0.04 percent. Royal Bank of Canada was down 0.43 percent at C$60.81. The Bank of Nova Scotia was up 0.1 percent at C$57.65. In company news, Canada's airlines flew fuller planes in December, with dominant carrier Air Canada and No. 2 WestJet Airlines reporting record monthly passenger levels. Air Canada shares were up 5.08 percent at C$1.86. WestJet shares inched up 0.10 percent to C$20.23.