The S&P/TSX composite index fell 62.75 points to 12,512.04 following Monday's 109-point jump, while the TSX Venture Exchange was down 6.33 points to 1,575.06.
The Canadian dollar lost 0.38 of a cent to 100.51 cents US following a jump of about three-quarter of a cent on Monday.
American markets were also lower as the U.S. Conference Board reported that its index on consumer confidence edged down to 70.2 in March — from an upwardly revised 71.6 in February. The dip was mainly due to a spike in gasoline prices and was in line with expectations.
"Consumers' perceptions of the present situation continued to improve, but future expectations were weaker with rising gasoline prices potentially weighing on confidence," said CIBC World Markets senior economist Andrew Grantham.
The Dow Jones industrial average fell 43.9 points to 13,197.73.
The Nasdaq composite index was down 2.22 points to 3,120.35 and the S&P 500 index was off 3.99 points to 1,412.52.
Other data showed that U.S. home prices fell in January for a fifth straight month in most major U.S. cities, as modest increases to sales volume have yet to boost prices.
The Standard & Poor's/Case-Shiller home-price index shows prices dropped 0.8 per cent in January from December in 16 of 19 cities tracked.
The weak performance on markets comes after indexes in Toronto and New York netted strong triple-digit gains after U.S. Federal Reserve chairman Ben Bernanke said that the U.S. job market was still weak despite three months of job gains in excess of 200,000. Bernanke's comments were a strong indication that the central bank is prepared to keep its low-interest rate policies in place for some time to come despite the recent signs of economic growth.
Traders also interpreted Bernanke's remarks as an indication the Fed could launch another round of buying bonds in a move known as quantitative easing.
But analysts also suggested that the performance, coming on top of losses last week, indicates a market running out of steam after a respectable runup so far this year, with the TSX up about five per cent and the Dow ahead eight per cent.
"It shows you the emotional or psychological makeup right now," said John Stephenson, portfolio manager at First Asset Funds Inc.
"Markets sense a turn in the U.S., are probably getting a little ahead of themselves and there's really not a lot of data that's wonderful or dramatic or very much of it. I honestly think you're going to have a turn into sell and go away earlier than May — maybe it's now, maybe it's mid-April, but I sense that the market is very tired."
The gold sector was the biggest decliner, down about 1.3 per cent as bullion prices fell slightly from Monday's $23 rise, down 70 cents to US$1,684.90 an ounce. Agnico Eagle Mines (TSX:AEM) slipped 78 cents to $33.30.
Shares in Centerra Gold (TSX:CG) tumbled $2.43 or 15.07 per cent to $13.70 after cutting its production guidance at its Kumtor mine in the Kyrgyz Republic due to ice movement in the mine's pit that will delay access to a section of high grade ore.
The May crude contract on the New York Mercantile Exchange added to Monday's modest gain, up 30 cents to US$107.33 a barrel. But the energy sector dipped 0.72 per cent with Cenovus Energy (TSX:CVE) down 32 cents to $36.26 while Imperial Oil (TSX:IMO) shed 31 cents to $45.96.
The base metals sector fell 0.83 per cent with copper prices down one cent at US$3.88 a pound after jumping eight cents Monday. First Quantum Minerals (TSX:FM) dropped 36 cents to $18.84 while Inmet Mining (TSX:IMN) lost $1.56 to $55.88.
Lower railway stocks helped take the industrials group down 0.81 per cent.
Canadian Pacific Railway (TSX:CP) was down $1.01 to $77.90 after earlier hitting a fresh high of $79.29.
The railway held an investor day in Toronto. Executives hoped to convince investors that they shouldn't be replaced. CP's largest shareholder, New York hedge fund Pershing Square Capital Management, is pushing to elect six proposed directors who are in favour of ousting current chief executive Fred Green and replacing him with Hunter Harrison, the former head of rival railroad Canadian National (TSX:CNR). CN shares lost 63 cents to $79.77.
After the markets closed, the Ontario government announced that businesses in the provinces won’t get a promised break on the corporate tax rate until the province is able to balance its budget. In its new budget, the Liberal government says it can no longer cut the rate to 10 per cent from 11.5 per cent by July 2013, despite vowing to do so during the election.
In other corporate news, pipeline builder Enbridge Inc. (TSX:ENB) is investing $3.8 billion in a new round of construction to bring oilsands crude to the U.S. Gulf coast and help ease a bottleneck that has led to a glut of supply in the Midwest. It will expand its Flanagan South Pipeline from Flanagan, Ill. to Cushing, Okla. to a 36-inch diameter line with a capacity of 585,000 barrels per day. Enbridge also said it will twin a jointly owned Seaway Pipeline from Cushing to the U.S. Gulf Coast at Houston. Enbridge shares gained 23 cents to $38.46.
British Columbia miner Copper Mountain Mining Corp. (TSX:CUM) booked $44.7 million of revenue in its fourth quarter, bringing the total for the year to $66.5 million. It's the first year that Copper Mountain has booked revenue from operations.
The Vancouver-based company had $5.6 million of net earnings attributable to shareholders, or six cents per share, for the quarter ended Dec 31. For the full year, the net loss was $12.7 million or 13 cents per share and its shares added one cent to $4.74.
Note to readers: This is a corrected story. An earlier version had an outdated figure for the S&P/TSX composite index.