The S&P/TSX composite index lost 11.46 points to 12,516.89, closing out a tightly-traded session ahead of comments from both Canada's central bank and the U.S. Federal Reserve on Wednesday.
The Canadian dollar was up 0.45 of a cent to 96.47 cents US before the Bank of Canada issues its first policy decision under new governor Stephen Poloz, scheduled for 10 a.m. ET on Wednesday.
On the TSX, materials stocks dropped 2.2 per cent, as Agrium (TSX:AGU) fell $2.42 to $93.16.
The energy sector closed 0.3 per cent lower with the August crude contract on the New York Mercantile Exchange weakening 32 cents to US$106 a barrel.
Gold stocks were some of the biggest gainers as August bullion rose $6.90 to US$1,290.40 an ounce while the TSX gold sector rose 3.1 per cent. The September copper contract on the Nymex gained 4.2 cents to US$3.187 a pound.
In the U.S., investors still had plenty to digest as both Coca-Cola, the world's largest beverage maker, and retail brokerage Charles Schwab, delivered second-quarter results that disappointed analysts.
Coca-Cola reported declining profits and weak volume growth for the quarter. Charles Schwab said its profits fell seven per cent to $256 million, or 18 cents per share, in the second quarter, from $275 million, or 20 cents per share, a year earlier.
On Wall Street, the Dow and S&P moved back after closing at record highs for three consecutive sessions. The Dow shifted back 32.41 points to 15,451.85, the Nasdaq composite index was 8.99 points lower to 3,598.50 while the S&P 500 index slid 6.24 points to 1,676.26.
North American markets were holding back from any major shifts before the testimony from U.S. Federal Reserve chairman Ben Bernanke on Wednesday that could set the tone in markets for the rest of the summer.
"It's sort of a wait and see attitude. No one wants to position themselves too much in one way or the other," said Norman Raschkowan, North American strategist with Mackenzie Financial Corp.
In particular, investors will be looking for any further guidance on when the Fed will start to reduce its monetary stimulus.
The Fed is currently spending US$85 billion a month to buy financial assets in the hope of keeping long-term borrowing rates low and stimulating the U.S. economy. The new money created by the various monetary stimulus enacted in recent years have been one of the key drivers of the markets.
Disappointing retail sales figures on Monday reinforced expectations that the so-called "tapering" may take place later in the year than previously thought.
"The markets have rallied since (the Fed) softened their view, so people are a bit confused about how the Fed really sees the current environment," Raschkowan added.
Shares of Loblaw Cos. Ltd. (TSX:L) pulled back a day after the company announced it planned to buy Shoppers Drug Mart Corp. (TSX:SC) for $12.4 billion in cash and stock — a deal that has sparked a review by two ratings agencies.
Standard & Poor's is placing the companies on CreditWatch "with negative implications," which means it may lower or affirm the ratings within the next three months.
DBRS also placed Shoppers Drug Mart under review with negative implications, reflecting Loblaw’s "potential assumption of approximately $1 billion of Shoppers’ debt."
Loblaw stock dipped $1.53 to $48.60, while Shoppers moved down 43 cents to $59.69.
Barrick Gold stock (TSX:ABX) lifted nearly six per cent after a Chilean appeals court ruled against the world's largest gold mining company on Monday. The court ruled in favour of Chilean Indians who accuse Barrick of contaminating their water downstream and creating more doubts about the future of the world's highest gold mine. Shares of the company gained 93 cents to $16.620.
Sun Media Corp. announced plans Tuesday to cut 360 jobs and close 11 publications across the country, including its 24 Hours free daily newspapers in Ottawa, Calgary and Edmonton. The media company's parent, Montreal-based Quebecor Inc. (TSX:QBR.B), saw its shares fall 23 cents to $47.50.
In economic news, The U.S. Labor Department reported a tame inflation rate with the consumer price index rising 0.5 per cent in June from May. Two-thirds of the increase came from a 6.3 per cent jump in gas prices, the largest since February.
A day after Citigroup easily topped Wall Street expectations, Goldman Sachs did the same on Tuesday. The global investment and securities firm reported that it doubled its quarterly profits for the second quarter, and posted revenue of US$8.61 billion.
Johnson & Johnson also said its second-quarter profit more than doubled thanks to higher sales of medicines and medical devices.
After the market close, Yahoo Inc. said its earnings climbed 46 per cent, thanks to a major boost from an investment in Chinese Internet company Alibaba. But its revenue fell 7 per cent from last year. The company earned US$331 million, or 30 cents per share in the three months ending in June. That compared with net income of $227 million, or 18 cents per share, at the same time last year. Revenue totalled $1.14 billion.