CANADA STOCKS-TSX up for third straight day on resource strength

* Materials group leads TSX higher as gold price gains

* Bombardier down, Magna up after layoff announcements (Adds details, quote)

By Jennifer Kwan

TORONTO, Feb 5 (Reuters) - Toronto's main stock index closed higher for a third straight session on Thursday in a broad rally led by strength in the key energy and materials groups, which rose on higher commodity prices.

Materials, home to mining and fertilizer companies, rose 4.2 percent. Among heavily weighted gainers were miner Barrick Gold (ABX.TO), up 4.2 percent at C$47.65, and fertilizer producer Potash Corp of Saskatchewan (POT.TO), the top net gainer, which rose 8.7 percent to C$106.10.

The oil and gas group rose 1.9 percent as the price of crude settled higher at $41.17 a barrel on hopes for a U.S. stimulus plan. EnCana Corp (ECA.TO) was up 2.8 percent at C$55.70.

Also helping the index higher was the big financial services sector, which fought back from a 1.6 percent drop to finish the day up 1.8 percent, in part on optimism over a possible plan to shore up the ailing U.S. banking sector. Royal Bank of Canada (RY.TO) rose 2 percent to C$31.24.

The rise could suggest the market is "banking on some kind of resolution to the problem in the United States," said Fred Ketchen, director of equity trading at ScotiaMcLeod. However, he added it was likely still too early to get "too excited."

Mining stocks were higher despite softness in base metals prices, which could be a sign that investors are pricing in the prospect of recovery, said Bob Gorman, chief portfolio strategist at TD Waterhouse.

"I do think you have some nibbling there," he said. "It's a combination of the supply response and people looking ahead."

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