SAN FRANCISCO (MarketWatch) -- Canadian stocks erased earlier gains and closed sharply lower Thursday, as a reversal in energy shares and drooping financial and telecommunications sectors offset strength in metals.
The benchmark S&P/TSX Composite Index (CA:ISPTX: news , chart , profile ) finished down 242.10 points, or 2.8%, at 8,391.90.
On the Toronto Stock Exchange, decliners overtook advancers, 697 to 572.
The S&P/TSX Capped Diversified Metals index (CA:ITTMN: news , chart , profile ) pared earlier sharp gains but still added 3.7%.
But the S&P/TSX Capped Energy Trust (CA:IRTEN: news , chart , profile ) erased gains and lost 1.6%. The S&P/TSX Capped Financial index (CA:ITTFS: news , chart , profile ) slipped 4.2% and the S&P/TSX Capped Telecommunications index (CA:ITTTS: news , chart , profile ) slid 2%.
BCE Inc. (CA:BCE: news , chart , profile ) was down 4.3% in active trading.
The $41 billion leveraged buyout of the Montreal telecoms giant ended after auditors KPMG concluded that the company that would result from the deal would not be solvent, the potential buying group said. See full story on BCE.
Gains in the energy and materials sectors earlier tracked commodities futures, which soared in New York.
Crude for January delivery rose $4.46, or 10.2%, to end at $47.98 a barrel on the New York Mercantile Exchange. See Futures Movers.
Canadian Natural Resources (CA:CNQ: news , chart , profile ) pared gains but still added 4.9%. But Oilexco Inc. (CA:OIL: news , chart , profile ) reversed gains and was down 1.8%, and Suncor Energy (CA:SU: news , chart , profile ) fell 2.7%.
EnCana Corp. (CA:ECA: news , chart , profile ) lost 7.4% after it cut its capital expenditure budget for on gas, oil-sands and refinery projects Thursday, due to lower energy prices. EnCana said it plans to spend $6.1 billion in 2009, down from its $7.4 billion estimate for 2008.
Gold for February delivery rose $17.80 to end at $826.60 an ounce on the New York Mercantile Exchange. See Metals Stocks.
Yamana Gold Inc. (CA:YRI: news , chart , profile ) rose 2%, and Teck Cominco (CA:TCKB: news , chart , profile ) , the world's second-largest zinc producer, surged 9.1%.
On Wednesday, the TSX soared 2.8%, boosted by strong commodities gains. See full story on Wednesday's Canadian markets.
On the data front, Canada's merchandise trade surplus narrowed less than expected to $3.8 billion in October from a downwardly revised $4.3 billion in the prior month.
"The combination of lower commodity prices and a deepening U.S. recession points to a deteriorating Canadian trade balance over the coming months and a likely current account deficit," wrote Benjamin Reitzes, economist at BMO Capital Markets, in a note to clients Thursday.
On Wall Street Thursday, U.S. shares were off their lows as the energy sector strengthened. See U.S. Market Snapshot.
In currency trading, the Canadian dollar was at $C1.2348 against its U.S. counterpart, which plummeted 1.8% as a surge in U.S. jobless claims and other negative economic data put the greenback under heavy selling pressure. See Currencies.
