TORONTO (Reuters) - The Toronto Stock Exchange's main index rebounded from early losses to end slightly higher yesterday, as the financial sector posted a late turnaround amid talk of capital infusions for US bond insurers.

The heavyweight financial sector rose 3.8 percent after news that New York's insurance regulator had met with major banks to talk about a plan to help out bond insurers.

The Financial Times reported that major banks are under pressure from the state's insurance regulators to inject as much as $15 billion in new capital.

In Toronto, Canadian Imperial Bank of Commerce, Canada's fifth biggest bank, jumped C$4.16, or 6.4 percent, to C$69.62.

CIBC has the biggest exposure of any Canadian bank to the battered U.S. sub-prime market, some of which it has hedged with US bond insurer ACA Capital Holdings Inc, and other bond insurers.

Bank of Montreal rose C$2.21 or 4.1 percent, to C$55.85 and Royal Bank of Canada was up C$2.20, or 4.5 percent, at C$50.99.

The S&P/TSX composite index closed up 16.50 points, or 0.13 percent, at 12,657.38 with six of its 10 main sectors higher.

The late-afternoon rally offset sagging resources shares that had earlier pulled the index down by as much as 400 points on persistent fears of a US recession.

The materials and energy sectors remained on the downside, off 2.7 percent and 2.2 percent respectively. Potash Corp of Saskatchewan was down C$5, or 3.9 percent, at C$121.88 and Canadian Natural Resources shed C$2.91, or 4.6 percent, to C$60.97.

The volatile session came a day after Tuesday's 500-point gain, which ended a heavy five-session slump. The index has closed up in just two out of the past seven sessions.