TORONTO - Stock markets dropped heavily on Monday as crude oil prices fell to the lowest level since mid-March and fears grew that big American banks are imperilled by swelling bad debts.

Toronto's S&P/TSX composite index fell 311.50 points to 9,126.15, with the energy and base metals sectors contributing most to the drag.

The TSX base metals pulled back 10.1 per cent. Teck Cominco Ltd. moved 15 per cent lower to $9.11.

Energy stocks tumbled 6.5 per cent as the May crude oil contract tumbled 8.8 per cent on a stronger U.S. dollar and higher inventories. Oil ended the day down $4.45 to US$45.88 a barrel on the Nymex, its lowest level since March 11.

The Canadian dollar fell 1.56 cents to 80.74 cents US.

Wall Street's Dow Jones industrial average dropped 289.60 points to 7,841.73.

On the TSX, Precision Drilling Trust units lost eight per cent to $4.52 on news that an Alberta government investment vehicle is taking a 15 per cent stake in the oilfield services trust. The $380-million financing is to enable Precision to restructure debt.

U.S. oilfield service provider Halliburton Co. said its first-quarter earnings tumbled 35 per cent to US$378 million. Oil and gas producers, stung by dropping prices, cut back on exploration and drilling, and Halliburton provided a poor industry outlook for the coming quarters.

TSX financials slid 5.2 per cent. Renewed worries about the U.S. banks came on word that their lending remains tight and anxiety that Washington may take big ownership stakes in banks as its $700-billion bailout fund runs down.

Bank of America said it earned more than expected in the first quarter, but also set aside $13.4 billion to cover losses on souring debt.

Gold prices moved higher as the June bullion contract moved ahead 2.3 per cent, gaining $19.60 to $887.50 an ounce. The Toronto gold group advanced 6.8 per cent.

Information technology stocks were down 3.2 per cent, despite news that Oracle Corp. is bidding to buy Sun Microsystems Inc. for US$7.4 billion.

The Nasdaq composite index moved down 64.86 points to 1,608.21 and the S&P 500 index dipped 37.21 points to 832.39.

The TSX Venture Exchange ended down 13.80 points to 975.43.

After gains of about 25 per cent on major indexes since early March, traders were expecting some pullback.

"It's one day, but at the same time I thought it should've been done two weeks ago," said Gareth Watson, Canadian equity adviser at ScotiaMcLeod.

Watson added that there's a shortage of "convincing arguments as to why a rally should've been as sustainable for as long as it has during the worst financial and economic crisis since the Depression."

In Canadian corporate news, Timminco Ltd. lost 38 per cent to $2.36 after the company said some customers for its solar-panel-grade silicon are asserting that their contracts have been terminated and they want their deposits back. Timminco also is considering a $15-million equity private placement.

Martinrea International Inc. is taking advantage of the insolvency of SKD Co. to pay $3 million for factory equipment and other assets which in better times produced $125 million in annualized revenue. The auto parts maker's stock gained a penny to $3.91.

MI Developments Inc. has exited its bid to buy insolvent racetrack operator Magna Entertainment Corp., and has reduced its debtor-in-possession financing for the subsidiary's restructuring. MID shares gained seven cents to $8.72.

International drugmaker Eli Lilly & Co. said flat costs and strong sales of several major drugs helped first-quarter earnings rise 24 per cent, partly on higher sales of antidepressant Cymbalta.

Beverage and snack maker PepsiCo Inc. has offered to acquire its two largest bottlers -- Pepsi Bottling Group and PepsiAmericas -- for $6 billion in an effort to become more efficient.

Hasbro Inc. fell 2.1 per cent after America's second-largest toymaker said first-quarter profit fell 47 per cent because of a stronger dollar and reduced retailer inventories.