TORONTO (Reuters) - The Toronto stock market's main index finished broadly lower, dragged down by weak resource shares and nagging worries over the health of the US economy.

The index more than gave back all the gains it made in the previous session as losses in the energy, materials and financial sectors weighed amid fears that the impact of the credit crunch will hurt economic growth.

"The only positive we can take from this is that we are now extremely oversold," said Neil Andrew, associate portfolio manager at Leeward Hedge Funds.

"Sentiment could not be more bearish and in turn we are expecting a counter-turn rally just in time to save the day."

The S&P/TSX composite index closed down 179.19 points, or 1.33 percent, at 13,280.58 with eight sectors lower and one flat.

In what has been a rocky month for the TSX, the index has given up more than nine percent since the beginning of November.

"We keep seeing big selloffs and then things bounce," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"I think it's because everyone keeps expecting there's value and that there's a good buying opportunity," she added.

The materials sector led the way down, giving up 2.3 percent, as investors worried that a potential slowdown in global growth will send commodity prices lower.

Potash Corp of Saskatchewan was down C$3.28, or three percent, at C$104.70, while Barrick Gold fell 34 Canadian cents, or 0.8 percent, to C$41.19.

The energy sector was down 1.7 percent, while the price of oil was down 74 cents at $97.29 after hitting a record high of $99.29 a barrel.

The earlier jump in crude prices set the gloomy tone for the market on worries that high prices could further hurt the US economy.

In Toronto, Petro-Canada was down 44 Canadian cents, or 0.9 percent, at C$51.39, and Suncor Energy fell C$3.66, or 3.6 percent, to C$99.34.

Fears over the fallout of the credit squeeze were also heightened after US Treasury Secretary Henry Paulson told The Wall Street Journal that the number of potential home-loan defaults will be significantly bigger in 2008 than they were this year.