TORONTO - The Toronto stock market fell sharply Thursday in a broad-based decline despite solid earnings reports from two of the big Canadian banks as investors opted for caution ahead of Friday's U.S. non-farm jobless report.

The S&P/TSX composite index declined 143.18 points to 11,636.55 with a report showing a surprising contraction of the U.S. service industry during November also limiting advances.

The Institute for Supply Management's non-manufacturing index fell to 48.7 from 50.6 in October. Economists had expected the index to rise to 51.5, which would show continued expansion.

Market sentiment Friday will likely be determined by the U.S. jobless report. Economists expect that employers cut 130,000 jobs last month and that the unemployment rate remained flat at 10.2 per cent.

"It's understandable that the market would tread water at this point,"" said Tim Knepp, chief investment officer of Genworth Financial Asset Management.

"Job creation is going to be the key to sustaining any kind of rally."

The Canadian dollar moved down 0.41 of a cent to 94.81 cents US.

The TSX financial sector stepped 1.3 back per cent amid reports from three major banks Thursday.

"They're bumping into resistance right now, particularly TD and CIBC are kind of at the high end of their trading ranges," said Colin Cieszynski, market analyst at CMC Markets Canada.

"We had the prices run up on anticipation of a recovery in bank earnings, and so now we're getting the recovery in bank earnings but the market had already anticipated that to a certain extent, which is why we're getting this consolidation (over the last three months)."

CIBC shares were ahead $1.52 to C$70 on the TSX after the bank reported fourth-quarter net income of $644 million or $1.56 per share, up from year-ago profit of $436 million or $1.06 per share. Revenues totalled $2.9 billion for the quarter, compared to $2.2 billion last year.

CIBC's provision for loan losses surged 91 per cent from a year ago to $424 million due to higher losses in its credit cards, unsecured personal lending and corporate lending portfolios. But provision for credit losses was down $123 million from the prior quarter, primarily due to lower losses in these same portfolios.

TD Bank Financial Group (TSX:TD) reported net income for the fourth quarter was essentially flat compared with the same period last year at just over $1 billion. TD's provision for credit losses nearly doubled to $521 million but was down from the prior quarter. Its shares fell $1.71 to $66.08 as U.S. personal and commercial banking profits tumbled 51 per cent to $122 million. And continued weakness in the U.S. real estate market brought net impaired loans higher to $879 million, a rise of 163 per cent over the same time last year.

National Bank Financial Group (TSX:NA) missed expectations reported net income of $241 million or $1.39 per share for the fourth quarter, up from year-ago profit of $70 million or 37 cents per share. Revenues came in at $1.1 billion, rising 43 per cent from $765 million last year and its shares dropped $3.78 to $60.84.

In other earnings news, shares in Bombardier Inc. (TSX:BBD.B) fell 13 cents to $4.56 after the airplane and train manufacturer said its profits fell 26 per cent to $168 million in its summer quarter amid harsh economic conditions that triggered recent layoffs. But the company said it managed to keep revenues at year-ago levels of $4.6 billion and a contract worth US$779 million with AMR Eagle Holding Corp, the parent company of American Eagle Airlines for 22 CRJ700 regional jets.

The energy sector was down 1.17 per cent as the January crude contract on the New York Mercantile Exchange slipped 14 cents to US$76.46 a barrel.

EnCana Corp. (TSX:ECA) shares were down $27.62 to $28.81 after the energy company completed its split into two companies on Monday. EnCana becomes a pure play natural gas company while Cenovus Energy Ltd. is an integrated oil company. Cenovus shares started regular trading Thursday on the TSX and were off five cents to $26.25.

The gold sector was down just over two per cent as the February bullion contract on the Nymex gained $5.30 to a record US$1,218.30 an ounce.

The base metals sector declined 1.5 per cent as March copper was down 1.35 cents at US$3.24 a pound. Sherritt International (TSX:S) lost 14 cents to C$6.48.

Market heavyweight Research In Motion Ltd. (TSX:RIM) also pressured the TSX, moving down $1.35 to $61.53.

The TSX Venture Exchange edged 0.18 of a point lower 1,461.61.

Losses also picked up in New York late in the session as the Dow Jones industrial average fell 86.53 points to 10,366.15.

The Nasdaq composite index dropped 11.89 points to 2,173.14 while the S&P 500 index ticked 9.32 points lower to 1,099.92.

In other corporate news, WestJet Airlines Ltd. (TSX:WJA) stock slipped 29 cents to $11.65 after the carrier said it expects the ongoing transition to a new reservation system will have a negative impact on its fourth-quarter passenger revenue. The Calgary-based airline said revenue is expected to be at least 11 per cent below last year.

Shares in uranium giant Cameco Corp. (TSX:CCO) gained 26 cents to $32.93 after the company approved a 17 per cent increase in the annual cash dividend to 28 cents a share from 24 cents, beginning in 2010.