Toronto stocks fell sharply Thursday as some strong corporate earnings reports were pushed aside by worries over U.S. lending markets.

The S&P/TSX composite index closed down 260.72 points, or 1.85%, at 13,844.60.

Thursday’s losses came just two days after the index shed 400 points — its biggest one-day loss in terms of
points in six years.

The index plunged 2.8% on Tuesday and has given up 4.3% in three days — the steepest three-day slide in more than a year — after hitting a record high last week.

Nine of the 10 TSX 10 main sectors were lower, led by a 1.8% drop in the financials group, a 1.9% drop in materials, and a 2.2% drop among energy stocks.

CIBC, which has said it has both hedged and unhedged exposure to the high-risk U.S. subprime real estate market, dropped $2.03, or 2.2%, to $92.37.

TD Bank fell $1.57, or 2.2%, to $70.03, while Royal Bank of Canada was off $1.11, or 2%, at $54.96.

The market was also weakened by falling prices for gold, nickel and other metals. Teck Cominco dropped $2.84, or 5.8%, to $46.46.

Potash Corp. of Saskatchewan gained $2.39, or 3%, to $82.93 after reporting a higher second-quarter profit and boosting its outlook for the rest of the year. It led all weighted gainers.

Energy shares slipped on the back of falling crude prices, despite strong results from Petro-Canada, which was down $1.68, or 2.8%, at $57.32. The oil producer’s profit surged 79% on a jump in oil production.

Suncor Energy was down $2.23, or 2,3%, at $95.06 after it reported a 47% drop in second-quarter profit due to lower oil sands production because of an upgrader shutdown and because of higher operating expenses.

The junior S&P/TSX Venture composite index fell 73.10 points, or 2.27%, to 3,152.40.

The Canadian dollar, which hit a 30-year high earlier this week, gave up more than 1¢ today, closing at US94.91¢.

In New York, signs of further weakness in the U.S. housing market sent stocks tumbling, with the Dow industrials losing more than 300 points.

Two of the largest home builders in the United States, D.R. Horton and Beazer Homes, posted quarterly losses.

The Dow Jones industrial average dropped 311.50 points, or 2.26%, to close at 13,473.57.

The S&P 500 fell 35.43 points, or 2.33%, at 1,482.66. The tech-heavy Nasdaq composite index was down 48.83 points, or 1.84%, at 2,599.34.