July 22, 2008 / 9:32 PM / in 9 years

UPDATE 3-Toronto stocks falter as oils drop, CP Rail sags

(Adds details, quotes)

* TSX ends lower but trims earlier losses

* Resource shares retreat as commodity prices fall

* CP Rail drops after it cuts earnings guidance

By Leah Schnurr

TORONTO, July 22 (Reuters) - The Toronto Stock Exchange’s main index finished lower on Tuesday, but trimmed earlier steep losses as a rise by financials offset a drop in resource issues, which were hit by tumbling commodity prices.

The resource sectors led the downside and helped take the index down more than 1 percent in the morning, with energy shares hit by a six-week low for oil prices as fears over a tropical storm in the Gulf of Mexico eased.

The energy group fell 2.5 percent, with Canadian Natural Resources (CNQ.TO) down 4.2 percent, and EnCana Corp (ECA.TO) off 3.6 percent.

A decline in gold miners helped knock the materials sector down 2.2 percent, as the price of bullion was sharply lower due to weaker oil prices and a stronger U.S. dollar.

The financial sector offered support, despite falling earlier after U.S. bank Wachovia WB.N posted a record quarterly loss, as investors looked instead to recent better-than-expected results from other U.S. financial-services companies.

The S&P/TSX composite index .GSPTSE closed down 46.00 points, or 0.34 percent, at 13,643.19 with half of its 10 main sectors lower.

John Kinsey, portfolio manager at Caldwell Securities Ltd, noted that the financials benefited from some rotation of money out of the resource sectors and into the banks

“(Bank shares) are trying to put in a bottom, they’ve been beaten up and you’re probably getting this group rotation a little bit out of the commodities and into the financials,” he said.

In the oil patch, Canadian Natural Resources (CNQ.TO) was down C$3.74 at C$85.69 and EnCana slid C$2.86 to C$77.17 amid a further retreat by oil prices. Crude futures fell more than $3 to $127.95 a barrel amid expectations of weakening U.S. demand, while Tropical Storm Dolly was forecast to spare most offshore oil production in the U.S. Gulf.

Among gold producers, Agnico-Eagle Mines (AEM.TO) was off C$3.18, or 4.4 percent, at C$68.65.

Fertilizer company Potash Corp of Saskatchewan (POT.TO) was the biggest decliner by weight, shedding C$5.39, or 2.4 percent, to C$217.60. Workers at three mines owned by Potash voted to give their union a mandate to strike if no progress is made toward a new contract.

The financial sector rose 2.3 percent, with Canadian Imperial Bank of Commerce (CM.TO) up C$2.37, or 4.1 percent, at C$60.12, while Toronto-Dominion Bank (TD.TO) added C$2.13, or 3.6 percent, to C$61.41.

Canadian Pacific Railway (CP.TO) fell after the company cut its earnings guidance and reported a decline in quarterly profit amid rising fuel bills and U.S. flooding. CP closed down C$2.42, or 3.6 percent, at C$64.21.

Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario, said that so far Canadian quarterly results have come in mixed but a certain amount of anxiety remains.

“Not many are coming in ahead of expectations,” said Chandler. “Some are coming a little bit better than reduced expectations, but there’s still a tremendous amount of angst and nervousness, particularly around the financial-services sector.”

Market volume was 333 million shares worth C$6.9 billion. Decliners outpaced advancers 838 to 673. The blue chip S&P/TSX 60 index .TSE60 closed down 2.62 points, or 0.32 percent, at 816.77.

In New York, stocks climbed as the falling price of oil eased negativity after a raft of disappointing earnings and a weak outlook from Apple (AAPL.O).

The Dow Jones industrial average .DJI closed up 135.16 points, or 1.18 percent, at 11,602.50, and the Nasdaq Composite Index .IXIC rose 24.43 points, or 1.07 percent, to 2,303.96. ($1=$1.01 Canadian) (Editing by Peter Galloway)

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