March 14, 2008 / 3:16 PM / in 10 years

UPDATE 1-Toronto stocks sag under banks in volatile session

(Adds details, stock movement)

TORONTO, March 14 (Reuters) - The Toronto Stock Exchange’s main index was down sharply on Friday morning in a volatile session, stalled under the weight of falling bank shares, which continue to be dogged by the global credit crunch.

The index opened higher, but quickly plunged more than 200 points into the red as the energy sector tumbled along with big financial shares, which may have been hurt by news that U.S. investment bank Bear Stearns BSC.N needed emergency financing.

The TSX then recovered nearly half of those losses with the help of gold-mining stocks, which continue to ride gold prices higher.

By mid-morning, the S&P/TSX composite index .GSPTSE was down 128.96 points, or nearly 1 percent, at 13,314.54.

“I think with the (U.S.) recession more or less recognized at this point in time, people are looking for what else is out there in the way of bad news,” said Michael Sprung, president at Sprung & Co. Investment Counsel.

The index’s two biggest sectors, financials and energy, tumbled 2.4 percent and 1.3 percent respectively.

Royal Bank of Canada (RY.TO) was the biggest weighted loser, down C$1.33 at C$46.02, and Suncor Energy (SU.TO) was second biggest, off C$3.13 at C$103.93.

Canadian stocks mirrored volatility in major U.S. markets, which reacted strongly to the Bear Stearns news. For details, see: [nN14389680]

On the upside, Canadian gold producers punched further into record territory, rising 1.6 percent with Barrick Gold (ABX.TO) near a record, up C$1.55 at C$53.74.

Spot gold broke through the $1,000-an-ounce threshold for the first time on Friday, following in the wake of futures prices, which reached $1,000 an ounce on Thursday.

“If you look back over the last six months, (the TSX) has been overly reactive to any sort of changes to commodity prices or economic releases or earnings releases of large companies,” Sprung said.

$1=$0.99 Canadian Reporting by Jonathan Spicer, with additional reporting by Leah Schnurr; Editing by Peter Galloway

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