Canadian stocks tumbled Tuesday after the Bank of Canada cut interest rates to a historic low level and acknowledged that the economy has fallen into recession, shaking investor confidence.

The S&P/TSX composite index plummeted 336.55 points, or 3.8%, to end at 8,504.93.

Energy companies were hit particularly hard, dropping 6.8% despite a hefty gain for oil futures in the last day of trading for the February contract. Crude for February delivery, surged US$2.23, or 6.1%, to US$38.74 a barrel on the New York Mercantile Exchange.

Shares of Suncor Energy Inc. were slammed after the company chopped its spending plans for 2009 in half to $3 billion, and reported that 2008 earnings fell to $2.1 billion from $2.98 billion the previous year. Suncor shares dropped $4.16, or 15.8%, to close at $22.10.

Petro-Canada shares were also down sharply, falling $2.54, or 8.6%, to $27.11.

Talisman Energy Inc. shares fell 5.4% to $11.12 and Nexen Inc. slid 6% to $17.83.

Financial companies also suffered a severe drop in value, falling 5.8% in Tuesday’s trading.

Toronto-Dominion Bank shares plunged after TD Ameritrade Holding Corp.—an online brokerage firm in which TD Bank owns a 40% stake—reported that fiscal first quarter earnings dropped 23% to US$184.4 million. TD Bank shares retreated $2.80, or 6.6%, to $39.42.

Royal Bank of Canada shares were off 5.4% to $30.84 and Bank of Nova Scotia’s stock dipped 4.3% to $28.58.

CIBC shares shed $3.08, or 6.6%, to end the day at $43.52.

Sun Life Financial Corp. saw its stock plunge 10.8% to $23.91 and Manulife Financial Corp. was down a significant 9.5% to $20.11.

The materials group was a bright spot on the TSX, gaining 1.4% after gold futures advanced on Tuesday. Gold for February delivery rose US$15.30, or 1.8%, to close at US$855.20 an ounce on the Comex division of the New York Mercantile Exchange.

The sub-gold index rallied 3.3%.

Kinross Gold Corp. shares surged 5.1% to $23.11 and Barrick Gold Corp. shares moved higher by 6.1% to $44.30.

Goldcorp Inc. gained 3.9% to $33.80 and Alamos Gold Inc. shares rose 4.2% to $8.77.

Other materials companies declined, including Agrium Inc., down 9% to $38.69 and Inmet Mining Corp., lower by 9.9% to $19.46.

Junior companies also lost value on the Venture exchange, falling 16.27 points, or 1.9%, to close at 856.68.

The Canadian dollar continued to slide, dipping US0.81¢ to end at US78.89¢.

In the United States, the celebratory mood surrounding the inauguration of Barack Obama failed to extend to stock markets, which fell sharply lower.

The Dow Jones industrial average dropped below the 8,000-mark, dropping 332.13, or 4%, to 7,949.09

The S&P 500 index shed 44.9, or 5.28%, to 805.22.

The Nasdaq composite fell 88.47, or 5.78%, to 1,440.86.

State Street Corp., the largest money manager for institutions, tumbled 59% after unrealized bond losses almost doubled.

IE