TORONTO - The Toronto stock market closed sharply lower Friday with financial shares a weight after U.S. federal regulators filed civil fraud charges against Goldman Sachs over its dealings in the subprime mortgage market.

The S&P/TSX composite index dropped 140.86 points to 12,070.66 and the TSX slipped 12.66 points to 1,666.84.

The SEC charged Goldman and one of its vice-presidents with failing to disclose key information to investors regarding complex mortgage-backed securities.

"It's all a knee-jerk reaction to Goldman," Steven Goldman, chief market strategist at Weeden & Co., said of the market's tumble.

The SEC alleges Goldman failed to disclose that one of its clients helped create -- and then bet against -- subprime mortgage securities that Goldman sold to investors. Goldman shares fell $23.57 or 12.8 per cent to US$160.70.

The TSX financials sector fell 0.69 per cent as TD Bank (TSX:TD) backed away 83 cents to C$76.13 and Manulife Financial (TSX:MFC) declined 42 cents at $19.40.

Commodity stocks also depressed the TSX as investors flocked to the perceived safe-haven status of the U.S. dollar following the Goldman announcement and new developments in the Greece debt crisis.

Most commodities are priced in U.S. dollars and a stronger greenback makes commodities more expensive for investors holding other currencies.

The May crude contract on the New York Mercantile Exchange was down $2.27 at US$83.24 a barrel. On the TSX, the energy sector moved down per cent and Suncor Energy (TSX:SU) gave back $1.16 to C$33.65 and Canadian Natural Resources (TSX:CNQ) lost $1.75 to C$77.06.

Gold stocks were down as the June bullion contract on the Nymex fell back $23.40 to US$1,136.90 an ounce. Goldcorp Inc. (TSX:G) faded 86 cents to C$39.44 and Barrick Gold Corp. (TSX:ABX) was down 49 cents at C$39.65.

The base metals sector slipped 2.41 per cent as May copper dropped nine cents to US$3.51 a pound. Teck Resources (TSX:TCK.B) lost $2.02 to C$42.67.

A strong greenback pushed the Canadian dollar down 0.97 of a cent to 98.7 cents US even as Canadian manufacturing sales edged up 0.1 per cent in February to $44.1 billion, the eighth increase in nine months.

The greenback made gains amid reports that Greek Prime Minister George Papandreou said preparations were being made on procedures to tap a joint European-International Monetary Fund aid plan, should it be needed. On Thursday, the Greek government requested talks with European Union, European Central Bank and IMF officials next week, which was widely seen as a step toward activating the aid package.

"It seems like things are heading in that direction," said Philip Petursson, director of institutional equities at MFC Global Investment Management. "Greece definitely is one problem that has not been solved."

The industrials sector also made a dent in the market with Canadian Pacific Railway (TSX:CP) down 60 cents at $58.42.

There was also dissatisfaction with the latest batch of American corporate earnings.

General Electric said Friday its first-quarter earnings fell by almost a third, weighed down by its GE Capital lending unit and lower profits in its big industrial divisions. The earnings exceeded expectations, but GE missed on revenue and its shares declined 53 cents to US$18.97.

Google Inc. reported strong earnings after the market closed Thursday, but a jump in spending has investors worried about future growth and its shares fell $44.99 or 7.56 per cent to US$550.31.

The general tone of earnings results from the first week of the U.S. reporting season was largely positive. But analysts say the market is much less easily impressed with results.

"The results largely this week have been to the upside not only on revenue but earnings," Petursson said.

"But a lot of that had already been priced in. The first quarter was what we expected. Valuations are not unreasonable but they are at the higher end of what you might call fair value and the belief in a summer correction is leading people to start taking some profits early."

The Dow Jones industrial average fell 125.91 points to 11,018.66. The Nasdaq composite index dropped 34.43 points to 2,481.26 while the S&P 500 index lost 19.54 points to 1,192.13.

Buyers were further discouraged by a sign of deteriorating U.S. consumer confidence.

The University of Michigan's consumer sentiment survey for April fell 4.1 points to 69.5, the biggest monthly setback since February 2009, and the lowest level since November.

In other corporate news, shares in drug developer Aeterna Zentaris Inc. (TSX:AEZ) tumbled 39 cents or 23.49 per cent to $1.27 after it said Thursday that it has deal to raise US$15 million in a registered direct offering. The drug developer said it will sell 11.1 million shares to a group of institutional investors at $1.35 per share and issue warrants to acquire 4.4 million shares at an exercise price of $1.50 per share.

Air Canada (TSX:AC.B) gained 12 cents to $2.50 after analyst Ben Cherniavsky at Raymond James Financial Inc. raised his rating on the carrier to "strong buy" from "outperform."

He also promoted WestJet to "outperform" from "market perform" but its shares dipped 30 cents to $13.50 after U.S. carrier Southwest Airlines announced that it was dropping plans to sell travel to Canada in a partnership with the Calgary-based firm. Southwest said Friday it pulled out after WestJet asked for changes in the agreement that the two reached back in 2008.

Shares in green power firm Finavera Renewables Inc. (TSXV:FVR) jumped 2.5 cents or 21.74 per cent to 14 cents after it adopted a shareholder rights plan to guard against unwanted takeover bids after it received inquires about a possible acquisition of the company.