TORONTO (Reuters) - The Toronto Stock Exchange's main index tumbled more than 250 points yesterday as financial and raw material shares in particular were stung by resurgent fears over the health of the US economy.

Banks and other financial services institutions accounted for the TSX's top five losers by weight, but mining stocks plunged 4.7 percent as investors weighed the effect a weaker US economy would have on demand for base metals.

Frayed nerves south of the border appeared to infect the Canadian market after New York's attorney general said government-sponsored mortgage financiers Fannie Mae and Freddie Mac would receive subpoenas as part of a probe of the home loan industry.

That served to revive fears over the troubled US sub-prime mortgage market, which earlier this year sparked turmoil in global credit markets and led to a summer plunge of more than 12 percent on the Toronto index.

The S&P/TSX composite index closed down 252.38 points, or 1.8 percent, at 14,118.18 yesterday with all sectors in negative territory. The index has fallen in four of the past five sessions, shedding about 3.5 percent.

"There's a lot of concern leading to fear about a lot of things - asset-backed commercial paper, sub-prime mortgages - feeding into the financial stocks," said Irwin Michael, portfolio manager at ABC Funds.

Financial shares were also pulled lower by ING Canada , which reported a bigger-than-expected drop in third-quarter profit. The company's stock was off C$5.18, or 11.5 percent, at C$39.88, while the wider financial sector dove 2.8 percent.

Overall, Royal Bank of Canada led the downward march, off C$1.67, or 3.1 percent, at C$51.63. Among materials producers, Teck Cominco Ltd, the major zinc and copper producer, slumped C$2.04, or 4.5 percent, to C$43.70.

Analysts said materials shares were also hurt by profit-taking even though gold prices rose as US dollar tumbled. Among those reporting earnings, commercial printer Quebecor World Inc. dropped 45 Canadian cents, or 5.6 percent, to C$7.57, after it posted a deep quarterly loss.

Enbridge Inc and BCE Inc fell 3.6 percent and 0.6 percent, respectively, after those two firms reported quarterly results.

Energy stocks, which had given some support to the market earlier in the day, gave up their gains as the price of oil reversed direction. The influential sector closed down 1.1 percent.

Oil prices earlier had surged to a record $98.62 a barrel, bringing crude near its inflation-adjusted peak of $101.70. It hit that level in 1980, when war between OPEC producers Iran and Iraq ignited an oil supply crisis.

Trading on the Toronto index topped 81.2 billion shares for the year during the session, surpassing its previous record, set last year.

Market volume Wednesday was 477 million shares worth C$8.7 billion. Decliners easily outpaced advancers 1,218 to 455. The blue chip S&P/TSX 60 index closed 14.08 points lower, or 1.7 percent, at 822.79.

In the United States, the Dow Jones industrial average fell 360.92 points, or 2.64 percent, to close at 13,300.02. The Nasdaq Composite Index declined 76.42 points, or 2.7 percent, to close at 2,748.76.