TORONTO (Reuters) – The Toronto Stock Exchange's main index tumbled more than two percent in choppy action yesterday in a broad retreat on uncertainty over the effectiveness of the proposed $700 billion US financial bailout plan.

The lone group to make gains was the materials sector, pushed up by gold producers as bullion prices rose on the commodity's safe-haven allure and the weaker US dollar. Among gainers, Goldcorp was up 9.8 percent at C$37.89.

But the broader market was rattled by concerns over how much the US government's plan to take over sour mortgage-related debt from financial groups will help financial markets in the long term, analysts said, as well as uncertainty over the details of the plan.

In Toronto, the financial sector was down 3.7 percent, while Bank of Montreal fell 4.8 percent to C$47.53.

"I don't know if anyone's really grasped what this means, what the implications are, (and) what the long term solutions are, if any," said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc, in Vancouver.

The S&P/TSX composite index closed down 274.92 points, or 2.13 percent, at 12,638.07 with all but one of its 10 main sectors in a downturn.

The selloff comes after a stunning hike of more than 800 points on Friday on optimism over the US-led moves to shore up the financial system, as well as a rally in commodities.

But by yesterday some of the lustre had worn off as investors worried about the outcome of the US proposal.

"What you would normally do is take money and invest in some of these companies that you want to save, rather than buying their lousy loans," said Douglas Davis, president at Davis-Rea.

"It'll help, but it's just like a Band-Aid," Davis added.

A surge in oil prices failed to help the heavyweight energy sector as investors remained cautious over whether the gains would be sustainable.

Oil spiked nearly 16 percent to settle at $120.92 a barrel as the front-month futures contract expired and the US dollar weakened.

Toronto's energy sector lost 1.8 percent, while Canadian Natural Resources was down 3.3 percent at C$84.47, and Suncor Energy gave up 5 percent to C$49.40.