TORONTO (Reuters) - The Toronto Stock Exchange's main index, caught in the crosshairs of sharply lower commodity prices and nagging fears over the global credit crunch, fell as much as 585 points yesterday before a bank-led rebound allowed it to recover nearly two-thirds of those losses.

The S&P/TSX composite index closed down 200.06 points, or 1.5 percent, at 12,848.70, wiping out all the gains the index had booked so far this year. It began the year at 12,908.39.

The TSX fell as low as 12,463.78 midway though the day. But after a flurry of soothing words late in the session from the country's big banks, ended with momentum toward the upside.

In 19 sessions, the key index has plummeted 1,798 points, or 12.3 percent, from a record high of 14,646.82, as panic that started in the troubled US subprime mortgage sector infected global credit markets and battered equities around the globe.

"There must have been a lot of margin calls to lead to this collapse because there hasn't been any cataclysmic news, especially in Canada," said Julie Brough, assistant vice-president at Morgan Meighen & Associates.

She noted that the TSX closed under its 200-day moving average the day before, "so for technical people that probably set a trigger sale into place".

The TSX financials sector was the lone gainer yesterday, while others logged steep losses. Materials led the fall, plunging 4.6 percent, while the energy sector sank 2.4 percent.

Precious and base metals prices fell sharply yesterday on growing fears that global economic growth might slow on the back of battered financial markets. Crude oil and natural gas futures were also down on the prospect of lower demand.

In the materials group, Potash Corp. of Saskatchewan fell C$4.49, or 5.2 percent, to C$81.71, and Barrick Gold tumbled C$1.86, or 5.4 percent, to C$32.39.

Among oil and gas producers, Canadian Natural Resources was off C$1.90, or 2.8 percent, at C$67.

"It's a continued re-pricing of risk driven by a withdrawal of liquidity," said Gavin Graham, chief investment officer at Guardian Group of Funds.

"But this is a slow-motion train wreck that you could have seen coming with housing prices peaking a year ago and subprime providers imploding in February - but people chose to ignore it."