TORONTO (Bloomberg) — Canada's main stock index fell the most in more than three years, after Canadian Pacific Railway Ltd. followed larger rival Canadian National Railway Co. in reporting a drop in profit, and said the rising Canadian dollar poses a challenge to earnings.Crude oil and natural-gas prices slid, dragging down energy companies including EnCana Corp., and stoking speculation that such gas-producing energy royalty trusts as Advantage Energy Income Fund may cut their dividends.

The Standard & Poor's/TSX Composite Index fell 400.17, or 2.8 percent, to 14,068.16 in Toronto as 10 stocks fell for every one that rose in the benchmark. The S&P/TSX slid the most since a 3.5 percent drop on April 28, 2004, and has retreated for three days since reaching a record on July 19. Declines accelerated after Countrywide Financial Corp.'s second-quarter profit fell, highlighting concerns that the U.S. housing crisis if spreading.

"There may be an economic slowdown coming in North America," said Peter Hodson, who helps manage $3.6 billion as senior portfolio manager at Sprott Asset Management Inc., after the railroad profit reports. "Oil and a lot of commodities are going lower. Today's bad enough to cause people to sit it out and wait for some strong earnings."

Shares of Canadian Pacific, the nation's second-largest railroad, fell C$3.10, or 3.6 percent, to C$83.60. Second-quarter profit fell 32 percent to C$257 million ($246 million) from C$378 million, after a year-earlier tax gain, the company said.

Excluding one-time items, earnings were C$1.12, exceeding the average estimate of C$1.11 a share of 10 analysts surveyed by Bloomberg News. Sales rose 7.5 percent to C$1.22 billion.

"We still face some significant challenges through the rest of 2007 with rising fuel refining margins and the strengthening Canadian dollar," Canadian Pacific Chief Executive Officer Fred Green said in a statement.