TORONTO (Reuters) - Toronto's main stock index closed sharply lower yesterday as Bank of Montreal's results came in below market expectations and concerns over domestic growth and the global recovery pressured commodity prices.

The TSX's key financial sector led the slide, dropping 2.9 percent, its steepest percentage loss in two months.

Bank of Montreal (BMO), the top net loser, said its quarterly profit climbed 20 percent as it set aside much less money for bad loans, but it missed market expectations as trading income dived. BMO shares fell 6 percent to C$55.50.

"BMO had been one of fastest movers and best performers in the last two quarters so it had risen high. People had reasonable expectations," said John Stephenson, senior vice-president at First Asset Investment Management Inc.

"They expected a reasonably in-line quarter so it was a shock."

The market worried that other Canadian banks could report similar results and pushed their shares down.

Canadian Imperial Bank of Commerce fell two percent, National Bank of Canada dropped three percent, while Royal Bank of Canada slid three percent. Bank of Nova Scotia fell 2.8 percent and Toronto-Dominion Bank was lower by 1.7 percent.

The Toronto Stock Exchange's S&P/TSX composite index finished the day down 161.28 points, or 1.4 percent, at 11,557.35, its lowest closing level in a week.

Even without the disappointing results from BMO, the market would have fallen along with global markets on worries about the economic recovery, analysts said.

Six of the TSX's 10 main sectors were lower, with resource issues weighing heavily as the price of oil and base metals fell on recovery fears.

US and Canadian economic data yesterday did little to lift investor spirits. Sales of previously owned US homes took a record drop in July to 15-year lows, suggesting further loss of momentum in the economic recovery.

In Canada, data showed retail sales rose less than expected in June, sending the Canadian dollar sharply lower.