The S&P/TSX composite index fell for a fifth session, down 34.32 points to 12,409.33.
The loonie closed up 0.81 of a cent to 97.47 cents US after earlier surging as high as 98.06 cents US as the U.S. currency sold off.
U.S. indexes were volatile as the Dow Jones industrials came back from a 117-point slide to gain 80.03 points to 15,040.62, the Nasdaq rose 22.58 points to 3,424.05 and the S&P 500 index was 13.66 points higher to 1,622.56.
Traders took some comfort from a report Thursday that U.S. claims for unemployment benefits, often seen as a proxy for a proxy for layoffs, fell 11,000 last week to a seasonally adjusted 346,000, a level consistent with steady job growth.
Economists have been forecasting that the U.S. economy cranked out a total of 165,000 jobs last month. But that modest figure was called into doubt Wednesday after payroll firm ADP reported that the U.S. private sector cranked out 135,000 jobs during May, less than the 165,000 that had been expected.
Also, the latest reading on the health of the U.S. service sector showed rising expansion but the data also showed that hiring slowed further in May to the lowest level since last July.
North American markets fell sharply on the jobs data. But the slide Wednesday was just the latest jolt of volatility over the last couple of weeks after Fed chairman Ben Bernanke said May 22 that the Fed may decide to taper its bond purchase program within its next few policy meetings if the U.S. economy gains steam.
That program, involving the purchase of US$85 billion in bonds each month, has not only kept interest rates low, it has also helped fuel a huge rally on U.S. markets, leaving the Dow industrials ahead about 14 per cent for the year.
"People just got scared by that statement and thinking that stimulus was going to come off," said Sadiq Adatia, chief investment officer of Sun Life Global Investment.
"I don’t think people are really believing that the stimulus is coming off but what they are saying is there is probably a higher risk than there was a few months ago and the fact the statement is out there is enough to cause unease."
The resource-heavy TSX is slightly below where it started the year as mining stocks in particular have been pummelled by a slow global economic rebound and lower demand for commodities. And Sadiq thinks the TSX is in for further losses.
"We have had the estimate of three to five per cent down for the year," he said.
"Given the strong environment that we have seen, in the rest of the world’s markets, Canada hasn't done anything. So imagine what happens when we see a decline in the world markets, Canada is going to go down."
Metals and mining stocks led declines, down almost one per cent while July copper stepped back five cents to US$3.32 a pound. Teck Resources (TSX:TCK.B) fell 35 cents to C$26.76.
Financials fell per cent with TD Bank (TSX:TD) down $1.02 to $81.83.
Industrial stocks helped the TSX close off its worst levels of the session and Bombardier Inc. (TSX:BBD.B) gained six cents to $4.92 as the transportation giant's rail division won a US$771-million order from the Stockholm Public Transport Authority, which has ordered 96 Movia metro vehicles.
The energy sector up 0.14 per cent with July crude ahead $1.02 to US$94.76 a barrel. Crescent Point Energy (TSX:CPG) gained 32 cents to C$36.24 while Imperial Oil (TSX:IMO) gave back 18 cents to C$39.39.
The gold sector was up about 0.3 per cent while August bullion climbed $17.30 to US$1,415.80 an ounce on the New York Mercantile Exchange. Goldcorp Inc. (TSX:G) climbed 22 cents to $30.64.
In other corporate news, Transcontinental Inc. (TSX:TCL.A) reversed a large loss last year to earn $27.5 million in the second quarter on stable revenues of $521.3 million. Adjusting for one-time items, the commercial printer and media company earned $34.8 million, in line with analyst expectations. Its shares slipped five cents to $11.70.