TORONTO - The Toronto stock market closed lower for a third session Tuesday, led by another slide in commodity stocks as oil and metal prices fell back on a lack of conviction about the strength of an economic revival.

The S&P/TSX composite index, up more than 150 points during the morning, fell 87.38 points to 10,307.4 as investors continue to wonder if a sharp runup in prices since early March was justified.

The negative performance comes at a time when the main Toronto index is up almost 40 per cent since the spring rally started March 9, amid hopes that an economic upturn will be in place by the end of the year.

But some analysts think investors are quite right to be cautious at this stage.

"We have come a little far much too quickly and I'd be a little cautious around these ranges," said Fred Ketchen, manager of equity trading at Scotia Capital.

"I just think that worldwide economic activity is certainly not in my mind something to foster this kind of a move. I think we need to get back to a reality situation where we realize that things have not totally repaired themselves. We have got a lot of challenges economically."

The TSX energy sector was down 2.4 per cent. For instance, giant EnCana Corp. (TSX:ECA) declined $1.35 to $58.99.

The July crude contract in New York finished the session down 15 cents at US$70.47 a barrel after going as high as US$72.77 in early morning trading.

The Canadian dollar moved down 0.17 of a cent to 88.14 cents US.

The TSX Venture Exchange moved 6.24 points higher to 1,139.19.

New York markets also added to Monday's steep losses amid mixed economic data.

The Dow Jones industrial average moved 107.46 points lower to 8,504.67 on top of Monday's 187-point slide.

The Nasdaq composite index stepped back 20.2 points to 1,796.18 while the S&P 500 index slipped 11.75 points to 911.97 as the Commerce Department reported that construction of homes and apartments jumped a better than expected 17.2 per cent last month to a seasonally adjusted annual rate of 532,000 units.

But other data showed that U.S. industrial production tumbled by a more than expected 1.1 per cent during May as the recession crimped demand for a wide range of manufactured goods including cars, machinery and household appliances. Production has declined for seven straight months.

Investors were also discouraged with earnings news from Best Buy Co., the biggest consumer electronics retailer in the United States. It said Tuesday its first-quarter profit fell 15 per cent even as its biggest competitor exited the market. Best Buy beat earnings estimates but its shares fell $2.82 to US$35.84.

Elsewhere on the TSX, the base metals sector came down from a strong rise to move down 2.65 per cent as the July copper contract in New York fell 2.95 cents to US$2.2555 a pound. Teck Resources (TSX:TCK.B) fell $1.13 to $18.27.

But the gold sector rose 1.75 per cent with the August bullion contract in New York ahead $4.70 to US$932.20 an ounce. Goldcorp Inc. (TSX:G) improved 86 cents to $39.18.

Meanwhile, Newfoundland and Labrador Premier Danny Williams has announced a tentative deal to develop Hibernia South, an offshore project estimated to contain 223 million barrels of oil. Williams says the provincial government will acquire a 10 per cent equity stake under the deal.

The development application was submitted in 2006 by the Hibernia Management and Development Corp., which includes ExxonMobil, Chevron, Petro-Canada (TSX:PCA), Norsk Hydro, Murphy Oil and Canada Hibernia Holding.

In other corporate news, Bombardier Aerospace (TSX:BBD.B) has lined up another 17 suppliers for the CSeries aircraft, which is expected to enter service in 2013. One supplier, CAE of Montreal (TSX:CAE), will provide engineering services and simulation to support the design, testing and certification of the aircraft.

Bombardier shares were down 11 cents at $3.31 while CAE lost seven cents to $7.02.

CAE has also sold two additional full-flight simulators for training crews of Airbus commercial jets and a suite of support services to the Bahrain Mumtalakat Holding Co., an arm of the kingdom's government. The total list price value of the contract is above C$50 million.

Air Canada (TSX:AC.B) shares ran ahead 13 cents to $1.62 after it announced has tentative deals with all five of its unions on a restructuring plan.

The tentative contracts include a pension funding holiday and equity restructuring.

The announcement comes on the heels of reports that the airline is planning to seek about $600 million in financing, in part from government agencies, as part of its broad out-of-court restructuring.

SNC-Lavalin (TSX:SNC) said work will begin immediately on a C$1.2-billion contract from Algeria's national oil company, which has chosen the Montreal-based engineering company to build a natural gas processing facility. Its shares rose 29 cents to $42.55.