Oil plunges, TSX tumbles 200 points...

Toronto’s S&P/TSX composite index fell 221.56 points early in the afternoon to 13,788.83.

New York indexes were also in negative ground, retreating from strong morning gains.

Oil prices were down sharply from last Thursday’s record high close, tumbling $5.26 to US$140.03 a barrel, in part because of a stronger U.S. dollar.

The TSX energy sector was down more than two per cent. Sector heavyweight EnCana (TSX:ECA) gave back $1.86 to $87.02.

The TSX slid 2.4 per cent last week as commodity stocks sold off on worries about slowing economic growth and higher inflation.

Those conditions prompted a downward revision of TSX expectations today by CIBC World Markets Chief strategist Jeff Rubin cut his year-end forecast for the S&P/TSX composite to 14,300 from 15,200.

His 2009 target for the TSX drops to 15,250 from 16,200. Rubin says “large swaths of the stock market” will be hit by a slowing economy, energy-driven inflation and higher interest rates.

“The main event is yet to come,” he predicted, “and the main event isn’t about subprime mortgages: it’s about $7 (a gallon) gasoline,” up from about US$4 a gallon now.

The TSX Venture Exchange moved 52.14 points lower to 2,510.85.

The Canadian dollar edged up 0.32 cent to 98.36 cents US after Statistics Canada reported building permits in May increased for a second straight month, rising 1.1 per cent to $6.6 billion. However, residential permits tumbled 6.6 per cent.

The Nasdaq composite index was off 3.23 points to 2,242.15.

The U.S. tech sector got a boost after activist investor Carl Icahn urged Yahoo shareholders to elect a new board to enable Microsoft Corp. to go ahead with a takeover of the company. Yahoo shares ran ahead $2.46 to US$23.81.

There will be profit deterioration in “stressed areas,” Rubin predicted.

“Not in the energy sector, obviously, but I think we’re going to start seeing it in auto parts, airlines — anything touched by transportation,” he said.

General Motors Corp. drifted 22 cents higher to US$10.34 on reports the automaker is planning to get rid of some brands, speed the introduction of small cars from overseas and make further white-collar job cuts.

On the TSX, energy-sector decliners included Canadian Oilsands Trust (TSX:COS.UN), down $2.32 to $49.98, and Canadian Natural Resources (TSX:CNQ), down $2.95 to $92.86.

Mining stocks also pressured the Toronto index amid dealmaking in the Canadian mining sector. Inmet Mining Corp. (TSX:IMN) offered $2 a share for Petaquilla Copper Ltd. (TSX:PTC) — a total of about $320 million in cash. Inmet shares slipped 97 cents to $62.55 while Petaquilla soared 97 cents to $1.93.

Equinox Minerals (TSX:EQN) fell 53 cents to $3.94 but Teck Cominco Ltd. (TSX:TCK.B) rose 43 cents to $44.75.

The August gold contract on the Nymex moved down $15 to US$918.60 and the TSX precious-metals sector declined 1.8 per cent. Goldcorp (TSX:G) lost 75 cents to $44.69.

Losses also picked up in the financial sector, down about one per cent with CIBC (TSX:CM) down $1.58 to $55.35 and Bank of Montreal (TSX:BMO) off 70 cents to $42.50.

The telecom sector was negative with BCE Inc. (TSX:BCE) down 26 cents to $39.38 after running up 13 per cent Friday on confirmation that the $52-billion takeover by a group led by the Ontario Teachers’ Pension Plan would go ahead at the agreed $42.75-per-share price, but without dividend payments until it closes in December.

Rogers Communications (TSX:RCI.B) gave back $2 to $38.65.

The TSX tech sector was down more than two per cent as Nortel Networks Corp. (TSX:NT) lost 46 cents to $7.39.

Sierra Wireless Inc. (TSX:SW) fell 99 cents to $14.01 after it terminated a planned purchase of U.S. wireless networking technology company CradlePoint Inc., saying a closing condition of the deal was not met. Sierra had announced in April it would buy CradlePoint in a $30.2-million cash-and-stock deal.

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