The Toronto stock exchange was battered by falling commodity prices Thursday, which pulled down the index by nearly 814 points to its lowest level in more than two years.

Partly attributed to a poor performance by Potash Corp. of Saskatchewan and Agrium Inc., Toronto's S&P/TSX composite index shed 813.97 points to close at 10,900.54.

Earlier in the day, Potash Corp. was down $26.32, or 19 per cent, to $110.18. Agrium fell $12.10, or 21 per cent, to $46.38 after Merrill Lynch cut its ratings for global fertilizer makers, saying it expects earnings to fall.

Adding to the rough day, the November crude oil contract on the New York Mercantile Exchange was down $4.56 to US$93.97 a barrel.

"Even the gold stocks were down," BNN's Linda Sims told CTV Newsnet Thursday afternoon, adding that Bay Street was hit hard by fears that a U.S. slowdown will result in a drop in demand for Canadian commodities.

"We were just hit in every direction," she said, adding that investors have been "fleeing out of commodities right now."

Sims said Thursday's market performance has been mirrored by dismal car sales and rising unemployment figures in the U.S.

"It looks like the U.S. economy is heading into a recession and there's a good chance that the rest of the world is going to go into recession with it."

Markets in New York were hammered as investors reacted to growing economic skepticism over the effectiveness of a government bailout plan for the embattled financial services sector.

The Dow Jones industrial average in New York lost 348.22 points to finish as 10,482.85 and the Nasdaq composite index fell 92.68 at 1,976.72.

Late Wednesday, U.S. senators passed a revised plan aimed at calming North American

markets and restoring faith in the country's troubled economy.

The plan passed by a margin of 74 to 25, and will now head back to the House of Representatives for another vote Friday.

House Speaker Nancy Pelosi told reporters Thursday she was confident the bill would pass.

"I think we were successful in mending it to make a better bill," said Pelosi.

She added that the changes haven't undermined the bill's primary objective, which is to "send a message of confidence to the markets that Congress will act."

Congress defeated an earlier version of the bill on Monday.

"This isn't our last act, we'll have plenty of time to do more," she said, aiming to reassure regular Americans they won't have to foot the final bill for the bailout.

"We see this as something that taxpayers will not have to pay for," she said, noting that the salvaged banks would be liable for any future shortfalls.

If ultimately approved, the plan will allow the federal government to purchase mortgage-banked assets from struggling lenders, once again giving them the ability to offer loans, stimulating the economy and helping head off a recession.

On Thursday, U.S. President George Bush said passing the bill would provide the "best chance" to fix the situation.

He said Congress "must listen" to those arguing for the bailout plan to be accepted.

CTV's Tom Clark said U.S. officials have indicated to him that there is growing support in the House for the bill.

"The expectation, in short, is that this will pass," Clark said Thursday from Washington.

He said when the bill was first introduced two weeks ago it was exactly three pages long.

"The version that passed the Senate yesterday was up to 451 pages," Clark said.

"By the time it goes to the House on Friday it may be modified even more, putting in a few things... to get some reluctant House Republicans on side."

Still, some traders remain skeptical about the plan's effectiveness.

"This bailout package is only the first in many, many steps that need to be taken in order to get stability in the credit markets, hopefully stability in the U.S. housing market as well, " Gareth Watson, Canadian equity adviser at ScotiaMcLeod, said Thursday.

"If you can create those two things, then at least you can create an environment where we might be able to see a turnaround in the U.S. economy.

"My personal view is the whole idea of this bailout package is a gesture that the U.S. government is on-side versus the absolute solution to everyone's problems."

In Japan, the Nikkei 225 average fell 1.9 per cent to 11,154.76 Thursday and benchmarks in Australia, South Korea and Taiwan also dropped.

In Hong Kong, markets were down for much of the day but managed to rally back later on. The Hang Seng index rose 1.1 per cent to 18,211.11.

The FTSE 100 was up 0.9 per cent in London, and Germany's DAX rose 0.3 per cent and the Paris CAC-40 added 0.6 per cent.

With files from The Canadian Press