Canadian stocks continued to lose value Wednesday, led by a particularly steep drop for financial firms, and a dismal revenue forecast from Nortel Networks.

The S&P/TSX composite index fell 349 points, or 2.9%, to close at 11,877.69.

The financials group was down 5.1%, with Manulife Financial Corp. sliding 6.2% to close at $33.76. This came after yesterday’s reports that Manulife would record costs in the third quarter related to investments in American International, Lehman and Washington Mutual Inc.

The heavyweight energy sector shed 1.3%, even though oil was up throughout the day on heightened concerns about Hurricane Ike’s impact on offshore oilrigs in the U.S. Gulf.

After slumping 10% in the past two sessions, crude for October delivery gained US$6.01, or 6.6%, to close at US$97.16 a barrel.

Petro-Canada shares were down 6.8% to $36.99 after the company said capital costs at its Fort Hills oilsands project in Alberta were set to rise by 50%.

The resources-laden materials group was up 2.1% on Wednesday, thanks to the biggest daily gain for gold futures in more than two decades.

Gold futures for December delivery closed up US$70, or 9% an ounce, at US$850.50 an ounce on the Comex division of the New York Mercantile Exchange.

Information technology shares sank 12.6%. Within the group, Nortel was down 51.8% to close at $2.76 after the company cut its 2008 revenue forecast and said it was looking to sell one of its businesses.

Biovail Corp. fell 8.6% to $9.95 after it said it had furthered its plans to shift into central nervous system treatments with the $100 million purchase of U.S. drugmaker Prestwick Pharmaceuticals.

The junior S&P/TSX Venture composite index ended its losing streak, rising 10.55 points, or 0.72%, to close at 1,469.59.

The Canadian dollar gained 0.06 of a cent to close at US93.56¢.

In New York, investor anxiety continued to push U.S. markets down after news that the Federal Reserve seized control of American International Group Inc. with an US$85 billion bailout.

The blue-chip Dow Jones industrial average fell 449.36 points, or 4.06%, to close at 10,609.66.

The S&P 500 Index declined 57.20 points, or 4.71%, to 1,156.39. The tech-heavy Nasdaq composite index dropped 109.05 points, or 4.94%, to close at 2,098.85.