TORONTO (Reuters) - The Toronto Stock Exchange's main index dove yesterday, as fears of the possibility of a recession in the US prompted a slump in resources and financials, leading to a third straight day of hefty losses.

The S&P/TSX composite index closed down 279.22 points, or 2.14 percent, at 12,795.64, its worst close since early March. All of the TSX's 10 main groups were lower.

The index has racked up losses of more than 900 points since Tuesday, erasing all of 2007's gains.

The energy and materials sectors were the biggest drag on the index yesterday, stung by weaker commodity prices and jitters over the impact a global slowdown could have on the demand for resources.

Potash Corp of Saskatchewan was the largest net decliner after an analyst questioned a build-up in North American potash inventory in December. The world's largest fertiliser producer skidded C$13.90, or 10.1 percent, to C$124.00. The materials sector was down four percent.

In the oil patch, Suncor Energy lost C$4.20, or 4.4 percent, to C$91.81 and Canadian Natural Resources fell C$3.40, or five percent, to C$64.98, as crude slid toward $90 a barrel. The energy sector trimmed 2.8 percent.

The beaten-up financials group, the largest sector on the index, dropped 1.3 percent while south of the border, Merrill Lynch & Co Inc., the world's largest brokerage, reported about $16 billion in mortgage-related writedowns and adjustments.

In Toronto, Royal Bank of Canada was off 54 Canadian cents, or 1.1 percent, to C$48.11 and Toronto-Dominion Bank lost C$1.25, or 1.9 percent, to C$65.25.

The Toronto Stock Exchange's main index has fallen 12.5 percent from its closing high reached in July, putting it in the zone of a technical correction. Overall, the index has shed more than 1,000 points, or 7.5 percent since the beginning of 2008.