Toronto stocks closed lower Tuesday as mixed economic data and a gloomy outlook for U.S. banks spooked investors.

The S&P/TSX composite index fell 164.20 points, or 1.52%, to close at 10,629.47. Eight of the 10 main groups TSX posted losses.

The financial group was down 2.6%, following U.S. banks lower after an analyst report painted a gloomy outlook for the U.S. banking industry.

Royal Bank of Canada fell 2.4% to $49.48, while Bank of Nova Scotia dropped 3.1% at $44.05.

Manulife Financial slid 1.6%, and Sun Life Financial fell 5.2%.

The financial sector followed U.S. banks lower after after an analyst report painted a gloomy outlook for the U.S. banking industry.

Shares of CI Financial fell 70¢ to $20.20, after the company reported a drop in second-quarter earnings, compared with a year ago. Earnings were sharply higher than the first quarter of 2009.

The energy sector fell 1.7% as the price of oil retreated. Suncor Energy dropped 3% to $34.91, while Canadian Natural Resources was down 2.5% at $62.22.

The junior S&P/TSX Venture composite index shed 8.37 points, or 0.71%. to end at 1,176.84.

Faltering economic optimism knocked the Canadian dollar down more than a cent against the U.S. greenback. The loonie closed at US90.79¢, compared with Monday’s close of US$91.85¢.

U.S. stocks fell on Tuesday after an unexpectedly large drop in wholesale inventories raised worries about an economic recovery.

The drop in U.S. wholesale inventories in June, which was nearly double expectations, suggests that businesses remained skeptical about a return in demand.

The Dow Jones industrial average dropped 96.28 points, or 1.03%, to 9,241.67. The S&P 500 fell 12.77 points, or 1.27%, to 994.33. The tech-heavy Nasdaq Composite Index fell 22.51 points, or 1.13%, to 1,969.73.

IE