TORONTO (Bloomberg) - Canadian stocks fell into a bear market, as Manulife Financial Corp. led financial firms on their steepest decline in eight years, after saying that it will write down investments with US banks and insurers.

Sun Life Financial Inc. fell to the lowest in four years, after it, too, said that it will take a charge on investments with American International Group Inc., the US insurer that is seeking to avert collapse with an emergency loan from the Federal Reserve. Nortel Networks Corp. slid the most in 25 years after cutting sales and profit forecasts. Barrick Gold Corp. jumped the most in nine years, leading a rally in raw-materials producers as investors sought a haven from financial market turmoil in gold.

The Standard & Poor's/TSX Composite Index dropped 2.9 percent to 11,877.69 at in Toronto, 21 percent below its June 18 record, meeting the common definition of a bear market. Canada became the last of the 23 developed nations in the MSCI World Index to suffer a 20 percent bear-market retreat.

"Big US institutions, supposed blue chips, are in trouble," said John Kinsey, who helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto. "There's another shoe to drop. We don't know where this'll end."

Canada's main equity benchmark derives more than three-quarters of its value from financial, energy and materials stocks. It's lost about C$214.9 billion ($201 billion) in value in September through Tuesday as it extended a slide from its peak three months ago.

Sun Life fell 8.1 percent to C$35.77, the most since the September 11, 2001, terrorist attacks. The nation's third-biggest insurer said yesterday that it will take a charge in the third quarter related to C$315 million in investments tied to American International. Two days ago it said it will take a writedown on C$334 million in bonds and C$15 million in derivatives contracts tied to bankrupt Lehman Brothers Holdings Inc.

Manulife had its steepest fall in four years, losing 6.2 percent to C$33.76. Canada's biggest insurance company said late yesterday that it expects to record costs in the third quarter related to investments in American International, Lehman and Washington Mutual Inc. The amount of the writedown is not yet known. The investments in the three firms represent less than one percent of its C$164 billion in assets, Manulife said.