TORONTO (Bloomberg) — Canadian stocks fell for a second day as commodity prices declined further, extending bear markets for such raw-materials and energy producers as Potash Corp. of Saskatchewan Inc. and EnCana Corp.

The slump in shares of commodity producers may worsen as tighter credit conditions push the stocks lower, Citigroup Inc. said. Also weighing on resource stocks was Ospraie Management LLC's decision to close its biggest hedge fund after bad bets on commodity shares. Financial shares resumed a rally begun last week on lower-than-expected subprime write-downs, led by Royal Bank of Canada. That advance was snapped yesterday when the country's main stock index dropped the most in seven months.

"It's a pretty ugly day again," said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. "In a bear market, the psychology gets worse and worse. The only light of hope is financials. Maybe the worst is over for them."

The Standard & Poor's/TSX Composite Index slid 1.2 percent to 13,137.72 in Toronto, after falling as much as 2.6 percent earlier yesterday. The S&P/TSX fell 3.4 percent on Tuesday, led by energy and materials shares, which account for more than two- fifths of its value, as commodity prices dropped the most since March. The index is 13 percent below its June 18 record.

Potash, the world's largest maker of the fertilizer, dropped 4.7 percent yesterday to C$164.53. The stock fell to the lowest since April 2, a third below its June 17 peak.

Smaller rival Agrium Inc. declined 4.7 percent to C$81.20.

Goldcorp Inc., the second-largest bullion producer by market value, slid 4.8 percent to C$31.81. First Quantum Minerals Ltd., a miner of copper in Africa, fell 5.7 percent to C$61.30.

"If you believe in the secular growth story, then it looks like we'll have a severe correction at least," Hand said. "If you believe that we've seen the traditional cyclical peak in commodity stocks, then they've got a lot further down to go. We don't know what it is at this point."

EnCana fell 2.9 percent to C$73.44. Canada's biggest energy company by market value has dropped 25 percent from its peak on June 18. Rival Canadian Natural Resources Ltd. declined 3.3 percent to C$81.98. Suncor Energy Inc., the second-largest producer of crude from oil sands, slid 2.5 percent to C$53.54. Yesterday, Suncor fell 9.7 percent, the most since February 1993.

Weak economic reports from Europe contributed to speculation that global demand for commodities, which account for more than half Canada's exports, will weaken.

Crude oil fell after Royal Dutch Shell Plc and ConocoPhillips said that Hurricane Gustav caused no damage to drilling rigs and platforms in the Gulf of Mexico. Prices are 26 percent lower than the record of $147.27 reached on July 11.

Natural gas, soybeans and corn, and gold and silver, also declined. The 163-member Bloomberg World Mining Index has tumbled by more than a third since climbing to a record May 19.