TORONTO (Reuters) — Toronto Stock Exchange's main index plunged yesterday, hit by disappointment over a smaller-than-expected rate cut by the Bank of Canada and by falling commodity prices.

The market had largely expected the Bank of Canada to cut its key rate by 50 basis points and the 25-point cut that it announced failed to fulfil expectations.

"The market is disappointed as they were thinking they'd cut a half," said Douglas Davis, president of brokerage Davis-Rea.

Also weighing was a quarterly loss reported by big Canadian insurer Sun Life Financial Inc, which was hurt by big credit-related writedowns and a decline in equity markets.

"The focus once seems to be turning to the real economy and to earnings reports," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.

"You had a substantial decline in US equities and that sort of sentiment got into the Canadian side as well. You add that to a less-than-upbeat assessment from the Bank of Canada about the prospect of the economy going forward and that all adds to a fairly negative tone that is hard to overcome in a market like this."

The S&P/TSX composite index snapped a two-day win streak to close down 455.60 points, or 4.44 percent, at 9,795.80, with all but one of its 10 main groups down. The small healthcare sector eked out a 3.9 percent gain.

The materials group led the way down, dropping 7.97 percent on falling prices for gold and base metals as fears that a global recession would cut demand.

Adding to the pressure were FNX Miningand North American Palladium, which dropped 13.8 percent and 18.3 percent respectively after the Canadian miners became the latest to announce mine closures due to sinking metals prices.

The oil and gas sector dropped 4.9 percent as oil fell $3.36 to $70.89 a barrel, pressured by expectations that a global recession will also cut demand for oil, which could limit the impact of any supply cuts by OPEC.

Suncor Energy was off 5.5 percent at C$28.83, while Imperial Oil shed 7.1 percent to C$39.73.