TORONTO (Reuters) - The Toronto Stock Exchange's main index ended higher on the back of rising energy and mining stocks, but it was down from its early-session highs as initial enthusiasm for a central bank plan to boost money market liquidity waned.

Stocks surged early as investors went bargain-hunting after the previous session's sharp drop, spurred by a move by major central banks to join forces to launch short-term funding to ease credit market strains.

But the rally sputtered and stocks pared gains as nervousness returned to the market.

"I think as the day progressed investors reassessed what the implications of the central bank effort," said Elvis Picardo, investment strategist at Northern Securities in Vancouver.

The S&P/TSX composite index closed up 85.67 points, or 0.62 percent, at 13,809.38, after earlier rising as high as 13,942.04.

The central bank move came a day after the US Federal Reserve disappointed markets by only trimming its key rate by a quarter percentage point, rather than a half.

"That overused term, 'roller-coaster ride', it applies today," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

He said credit fears were stoked by a continued flow of bad news out of US banks, as three — Wachovia, Bank of America , and PNC Financial Services Group — all warned of fourth-quarter writedowns and loan losses.

"When the banks take these hits, there's a natural inclination to tighten credit," Nakamoto said.

Five of the 10 TSX subgroups ended higher, led by a 1.48 percent rise in materials issues and a 2.04 percent rise in energy stocks, spurred by a combination of stronger oil prices and individual company news.

Oil jumped nearly five percent to above $94 a barrel.

Meanwhile, EnCana Corp, Canada's top oil and gas producer, rose more than three percent after the company said it will raise production by five percent in 2008, increase capital spending by 13 percent to $6.9 billion, and double its annual dividend to $1.60 a share.

EnCana stock climbed C$2.23 to C$68.65.

Among mining issues, Kinross Gold climbed 65 Canadian cents, or 3.6 percent, to C$18.75, spurred by gold prices hitting a two-week high.

HudBay Minerals climbed 83 Canadian cents, or 4.1 percent, to C$21.05.