July 22, 2008 / 3:51 PM / 11 years ago

UPDATE 1-Toronto stocks drop on soft oil, bank worries

(Adds details)

*Energy shares follow oil prices lower

*Financial shares rattled by Wachovia results

*Potash Corp slips on strike threat

TORONTO, July 22 (Reuters) - Toronto stocks dropped 1.5 percent on Tuesday as soft energy prices, weak results from one of the country’s biggest railway companies and bleak news from a big U.S. financial institution weighed on the market.

Canada’s heavily weighted financial shares dropped 1.7 percent after Wachovia Corp WB.N posted an $8.86 billion quarterly loss, slashed its dividend and announced thousands of job cuts.

Wachovia’s results, highlighting the damage done by the U.S. mortgage crisis, damped hopes that the U.S. bank sector was stabilizing, after Citigroup Inc, Wells Fargo and other banks reported stronger-than-expected results earlier in the week.

Bank of Nova Scotia (BNS.TO) dropped 0.3 percent and Sun Life Financial (SLF.TO) slipped 1.4 percent.

The vulnerability of Canadian companies to a weakening U.S. economy were highlighted by quarterly results posted by Canadian Pacific Railway (CP.TO). It reported a nearly 40 percent drop in earnings as a slowing U.S. economy held back shipments and fuel prices surged.

“We are being negatively impacted in large measure by earnings,” said Fred Ketchen, director of equity trading at ScotiaMcLeod.

“Until we get over all this stuff, I think you have to sit and be very cautious on the sidelines and that’s what a whole lot of people are doing.”

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 207.35 points, or 1.5 percent, at 13,481.64.

Energy shares slid 2.6 percent as crude oil <CLc1 dropped 3 percent to around $127 a barrel. The retreat came as a tropical storm moving over the U.S. Gulf was expected to miss key U.S. oil and gas facilities, a development that eased supply concerns.

Most of the major Canadian oil companies were lower including Canadian Natural Resources (CNQ.TO),off C$2.02 at C$87.41 and EnCana Corp (ECA.TO), down C$1.90 to C$78.13.

Among Canadian financial institution, Bank of Nova Scotia dipped 12 Canadian cents to C$47.78 and insurer Sun Life Financial (SLF.TO) slipped 60 Canadian cents to C$40.83.

The resource-heavy materials group fell 1.2 percent, led by market heavyweight Potash Corp POT.TO after workers at three sites voted in favor of a strike, intensifying supply worries.

Potash Corp dropped C$7.08 to C$215.91, as employees rejected the company’s offer on wages, vacation, bonus pay and other issues.

Overall, seven of the TSX index’s 10 main groups were lower.

Industrial shares were up 0.3 percent after both of the country’s top railways posted results.

On Monday, Canadian National Railway (CNR.TO) posted an 11 percent drop in second-quarter earnings, saying the stronger Canadian dollar and higher fuel costs crimped its bottom line.

Canadian Pacific dropped C$2.34 to C$64.29, while Canadian National rose C$1.70 to C$52.67 as it beat analyst expectations by 1 Canadian cent. ($1=$1.00 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)

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