REFILE-CANADA STOCKS-TSX bounces higher in volatile session

(Refiles to add dropped word 'percent' in second paragraph)

* TSX higher, but falls back from early 4.6 pct rally

* Financials drop 2.9 pct after bank warnings

* Energy, materials up after TSX's 9 pct drop on Thursday (Adds quote, details)

By Jennifer Kwan

TORONTO, Nov 21 (Reuters) - The Toronto Stock Exchange's main index bounced back into positive territory late Friday morning as financial and resource issues played tug-of-war in a highly volatile market.

The TSX opened strongly with an early gain of more than 4.6 percent, then tumbled into negative territory as weak financial issues dragged the market lower after its opening surge.

The composite then rallied back on strength the energy and materials sectors, up 2.6 percent and 12.1 percent, respectively.

Goldcorp (G.TO) rose 16 percent to C$28.73, and Canadian Natural Resources (CNQ.TO)jumped 7.6 percent to C$38.11.

"After what happened yesterday we saw a bit of a rebound happening overseas prior to the North American markets opening," said Michael Sprung, president at Sprung & Co. Investment Counsel of earlier market activity.

"It's sort of typical of what we've been seeing over the last couple of months that after particularly devastating downward movements in the market, we've seen to some extent a rebound the next day."

"The big question is how long is the euphoria likely to last," he added.

At 11:45 a.m. (1610 GMT), the S&P/TSX composite index .GSPTSE was up 98.15 points, or 1.27 percent, at 7,822.91, with three of its 10 main groups higher. Earlier, it raced 4.6 percent higher but quickly gave back those gains.

The index sank to its lowest level in five years on Thursday following two bank profit warnings and as the price of crude slid below $50 a barrel. It was the biggest percentage drop for the index since October 1987.

The financial sector was down 2.9 percent just before midday, paring earlier heavy losses .

Manulife Financial (MFC.TO) sank 4.3 percent to C$17.10 and Royal Bank of Canada (RY.TO) slipped 2 percent to C$34.97.