TORONTO - The latest round of worry about a worsening European debt crisis darkened investor sentiment and pushed stock markets lower for a second day Wednesday.

The S&P/TSX composite index closed off the worst levels of the day, clawing back a considerable part of an earlier 277-point deficit, to close down 155.73 points at 11,875.13.

Energy stocks led TSX decliners as investors continued to flock to the perceived safe haven of the U.S. dollar, which depressed commodity prices and currencies. The TSX Venture Exchange retreated 25.33 points to 1,597.08.

Fears of a Greek government debt default has overshadowed markets for months.

Now there are investor fears a US$144-billion bailout for Greece won't keep the crisis from spreading to other European countries like Portugal and Spain.

"Yesterday, there were rumours that Spain would soon request an aid package, subsequently denied, and today fear remains high," observed a briefing note Wednesday from Scotia Capital.

Investor nervousness was heightened Wednesday after Moody's Investor Services warned it may downgrade its view on Portugal's debt in the next three months as a result of the recent deterioration in the country's public finances as well as its long-term growth prospects.

Standard & Poor's last week downgraded Portugal's credit rating by two notches.

There are also concerns about the Greek government's ability to push through massive austerity measures in return for the cash. Wednesday's general strike in Greece -- which left three dead -- is unlikely to assuage concerns that the government will get the popular backing it needs.

"Mass protests and strike action in Greece (are) doing sentiment in global markets no favour," said Tim Hughes, head of sales trading at IG Index in London.

The stronger greenback pushed the Canadian dollar down 0.44 of a cent to 97.12 cents US on top of a 1.39-cent slide on Tuesday. The euro hit a 13-month low on Tuesday and fell further Wednesday to US$1.2824.

The energy sector fell 3.05 per cent after a report from the U.S. Energy Information Administration Wednesday that crude inventories rose by 2.8 million barrels last week, almost double the expected rise. Benchmark crude for June delivery closed down $2.77 to $79.97, on top of a four per cent slide Tuesday -- the first time crude has closed below US$80 a barrel since mid-March.

On the TSX, Suncor Energy (TSX:SU) fell $1.87 to C$32.51 while Canadian Natural Resources (TSX:CNQ) lost $3.12 to C$73.83.

Fears of the consequences of a sovereign debt default pushed the financial sector down 1.26 per cent with Bank of Montreal (TSX:BMO) giving back $1.36 to $60.93 while TD Bank shed $1.18 to $73.60.

Worries about softening demand for commodities pushed rail stocks down, with Canadian National Railways (TSX:CNR) off $1.06 at $59.07 while Canadian Pacific (TSX:CP) lost $1.35 to $57.42.

June gold on the Nymex reversed direction to move up $5.80 to US$1,175 an ounce but gold stocks were mixed. Kinross Gold Corp. (TSX:K) lost 84 cents to C$18.21 while Eldorado Gold (TSX:ELD) moved up 17 cents to C$16.07.

The base metals sector moved into positive territory, up a slight 0.25 per cent as copper also recovered from early sharp declines. The July contract eased three cents to US$3.15 a pound. Labrador Iron Mines Holdings Ltd. (TSX:LIM) gained 66 cents to C$6.28 but HudBay Minerals (TSX:HBM) lost 58 cents to C$11.45.

The telecom sector was ahead 0.3 per cent with Telus Corp. (TSX:T) shares up $1.08 at $38.61 after the company announced it was hiking its dividend by five per cent.

The TSX has declined every day this week, leaving the main index up just over 100 points for the year to date. Even before this latest round of sovereign debt worry, analysts were saying that markets were in need of a correction following the sharp run-up of last year.

"There has been one hell of a rally, a tremendous rally that has occurred over the past 12 months but the market pausing and gathering itself is not a bad thing," said Don Reed, president and CEO of Franklin Templeton Investments Corp.

New York markets also added to Tuesday's retreat after the ADP employment report said that companies added 32,000 jobs in April, in line with expectations. The ADP report was released two days before the release of the government's non-farm payroll report for April.

The Dow Jones industrial average lost 59.94 points to 10,866.83. Besides the debt worry, investors are also concerned that a stronger dollar will cut into profits for U.S. companies that heavily rely on foreign operations.

The Nasdaq composite index moved 21.96 points lower to 2,402.29, while the S&P 500 index declined 7.73 points to 1,165.87.

Meanwhile, it was another heavy earnings day for Canadian companies.

Talisman Energy Inc. (TSX:TLM) shares slipped seven cents to $16.85 after the Calgary-based global energy company saw its first-quarter earnings drop by about half, to $228 million, mainly because of big one-time gains last year.

Oil and gas pipeline distributor Enbridge Inc. (TSX:ENB) reported its net earnings in the first quarter fell 39 per cent to $342 million or 93 cents a share. That compares with net profits of $558 million or $1.54 a share last year, when the company booked gains from an asset disposal. Excluding one-time gains and losses, adjusted earnings rose to $318 million from $268 million. Its shares declined 53 cents to $48.29.

Agricultural products giant Agrium Inc. (TSX:AGU) posted a first-quarter net loss of US$7 million, dragged down by US$68 million in hedging losses, but improved from a year-ago loss of $60 million. Agrium shares lost 44 cents to $61.36.

Shares in drug maker Labopharm Inc. fell 17 cents to $1.32 after saying its first-quarter loss increased as revenue slipped five per cent. The Montreal-based company recorded a loss of $8.3 million or 13 cents a share in the January-March period, up from a loss of $8 million or 14 cents a share in the same period last year.

Paper producer Domtar Corp. (TSX:UFS) said it will restore a quarterly dividend in July for the first time in nearly five years -- 25 cents or $1 a year. Its shares lost early traction to close down $1.14 at $71.30.