Falling prices for gold and oil drove Toronto stocks lower on Thursday. The S&P/TSX composite index fell 86.35 points to close at 8,449.36.

The weak performance on stock indexes came after markets were spooked Wednesday by hints from the U.S. Federal Reserve that interest rates could go up.

The prospect of higher interest rates gave a boost to the U.S. dollar, which in turn sparked a selloff of gold, which dropped US$16.60 to US$398 an ounce, the first time it has gone below US$400 since December.

Declines were led by a 4.2% slide in the energy sector as the price of crude oil slid for a fourth day, losing 81¢ to US$32.81 US a barrel in New York.

Petro-Canada received an additional pummelling, with its shares down $8.05 to $58.45 after fourth-quarter profits fell to $200 million from $365 million a year ago.

At Suncor Energy, quarterly earnings rose to $300 million from $258 million thanks to rising oil prices, currency gains and increased production. But its shares were down 65¢ to $33.56.

Shares in Stelco finished 90¢ lower at 83¢ after Canada’s biggest steel company sought court protection from creditors.

Great-West Lifeco reported a jump in fourth-quarter profit. It shares gained 9¢ to closed at 47.85.

Sun Life Financial shares fell 39¢ to $35.05 after reporting lower Q4 profit, due in part to a $211 million provision to pay r potential costs related to the improper-trading investigation at its Massachusetts Financial Services Co. unit.

After the bell, Nortel Networks said it earned US$732 million in 2003, its first annual net profit since 1997.

The profit amounted to US17¢ per share for the year ended Dec. 31. For the fourth quarter, the company earned US$499 million, or US11¢ per common share on a diluted basis, with revenues of US$2.83 billion.

Nortel shares closed in Toronto at $8.76, up 17¢.

On the TSX, declines beat advances 846 to 427 with 177 unchanged.

The junior S&P/TSX Venture composite index fell 24.37 points to 1,779.77.

In New York, the Dow Jones industrial average finished 41.92 points higher at 10,510.29. The tech-heavy Nasdaq composite index lost 9.14 points at 2,068.23, while the broader S&P 500 gained 5.64 points at 1,134.11.

The Canadian dollar fell hard for a second consecutive session on Thursday.

The loonie finished a volatile session at US75.19¢, down from US 75.45¢ at Wednesday’s close.