The Toronto stock market fell as much as 585 points on Thursday before a bank-led rebound recovered nearly two-thirds of those losses.

The S&P/TSX composite index closed down 200.06 points, or 1.5%, at 12,848.70, wiping out all the gains the index had logged so far this year. The index began the year at 12,908.39.

The benchmark index fell as low as 12,463.78 midway though the session. But statements from the big banks this afternoon regarding their involvement in the asset-backed commercial paper market helped to calm investors and sent bank stocks higher.

The key index has plummeted 12.3%, from a record high of 14,646.82, the ongoing crisis in global credit markets has battered stocks.

The TSX financials group was the session’s lone gainer, up 0.9%, while other sectors logged steep losses.

Toronto-Dominion Bank climbed $1.98, or 3%, to $67.22, while Royal Bank of Canada was up $1.11, or 2.1%, at $53.

The materials group led fall, plunging 4.6%, while the energy sector sank 2.4%.

The September crude oil contract on the New York Mercantile Exchange fell $2.33 to US$71 a barrel, giving back Wednesday’s gains as storms brewing in the Caribbean didn’t appear to pose a threat to energy operations.

Precious and base metals prices fell sharply on Thursday on growing fears that global economic growth might slow on the back of battered financial markets.

Potash Corp. fell $4.49, or 5.2%, to $81.71,

The gold sector retreated 5.2% with the December bullion contract in New York down $21.70 to US$658 an ounce.

Barrick Gold tumbled $1.86, or 5.4%, to $32.39.

Canadian Natural Resources was off $1.90, or 2.8%, at $67.

The junior S&P/TSX Venture composite index plunged 217.02 points, or 8.16%, to 2,443.82..

The Canadian dollar rebounded after losing over 2¢ in the past two sessions, rising 0.22 of a cent to US93¢.

In New York, the Dow industrials closed lower for a sixth day on fears that credit markets may break down and hurt the economy and profits,

But blue chip stocks recovered 300 points in the last 45 minutes of the day, and the broader benchmark S&P 500 clawed back into positive territory.

The Dow Jones industrial average declined 15.69 points, or 0.12%, to 12,845.78. But the S&P 500 was up 4.57 points, or 0.32%, at 1,411.27.

The Nasdaq composite index was down 7.76 points, or 0.32%, at 2,451.07.