The S&P/TSX composite index gained 37.72 points to 12,848.89.
Falling prices for oil and metals helped push the Canadian dollar down 0.16 of a cent to 97.07 cents US.
Traders also digested data showing that retail sales in Canada rose by 0.6 per cent in July to $40.3 billion, which was in line with the expectations of economists. Statistics Canada said the advance in retail sales was led by a 3.2 per cent rise in sales at gasoline stations.
U.S. indexes were mainly lower as traders also took in data showing stronger house prices along with a dip in consumer confidence.
The Dow Jones industrials fell 66.79 points to 15,334.59 as the Standard & Poor’s/Case-Shiller 20-city home price index rose 12.4 per cent in July compared with a year ago, the most since February 2006. An increase in sales on a limited supply of available homes drove the gains.
Meanwhile, the U.S. Conference Board reported its consumer confidence index for September came in at 79.7, down slightly from August.
The Nasdaq was 2.96 points higher at 3,768.25 and the S&P 500 index shed 4.42 points to 1,697.42.
The approaching budget battle between the White House and Republican lawmakers has cast a shadow over markets. The U.S. government will reach its borrowing limit, or debt ceiling, by Oct. 1. If Congress doesn’t raise that limit, the government won’t be able to pay all its bills.
Republicans are demanding that any increase must result in expenditure cuts of an equal amount. President Barack Obama is demanding a debt limit increase with no conditions attached.
"It’s never a good thing when the markets are spending time focused on rancour and brinkmanship in Washington instead of being focused on what are some pretty reasonable fundamentals that we’re getting," said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
"You take the gains we have seen so far this year and you couple that with the potential distractions on the horizon and investors are a bit more inclined to take a wait-and-see approach in terms of what Washington may do."
The U.S. Federal Reserve added to the uncertainty.
Markets had initially rallied last week after the Fed surprised markets with its announcement that it won’t be cutting back its massive economic stimulus program just yet. The US$85 billion in monthly asset purchases by the central bank have helped keep rates low and supported strong gains on stock markets.
But the Fed is still expected to scale back on those asset purchases later this year.
Consumer staples led advancers, up about one per cent as convenience store chain Alimentation Couche-Tard (TSX:ATD.B) gained $1.62 to $65.33.
Financials also found support with TD Bank (TSX:TD) ahead 72 cents to $92.07.
The gold sector rose about 0.3 per cent as December bullion faded $10.70 to US$1,316.30 an ounce. Barrick Gold Corp. (TSX:ABX) improved by 26 cents to C$$19.14.
Other resource sectors were around the flatline as worries about the economic fallout from a U.S. budgetary impasse pressured commodity prices.
December copper was down four cents to US$3.26 a pound but the base metals sector rose. Thompson Creek Metrals (TSX:TCM) climbed eight cents to C$3.72.
The November crude contract on the New York Mercantile Exchange dipped 46 cents to US$103.13 a barrel. Oil has dropped more than six per cent since closing at a two-year high of $110.53 on Sept. 6. Cenovus Energy (TSX:CVE) was ahead 63 cents to C$31.30.
BlackBerry (TSX:BB) (Nasdaq:BBRY) was a weak spot a day after a move to take the company private. BlackBerry has signed a letter of intent with a consortium led by its biggest shareholder, Fairfax Financial (TSX:FFH), that involves shareholders getting US$9 a share. On Tuesday, the company's shares were down 30 cents to C$8.78 on the TSX and off 29 cents to US$8.53 in New York.
In corporate news, Sears Canada (TSX:SCC) has named Douglas Campbell as its new president and chief executive officer. He replaces Calvin McDonald, who spearheaded a number of major initiatives to reposition the company in a hotly competitive marketplace. He resigned to pursue an opportunity with a “leading international company,” which wasn't identified. Sears Canada shares dropped seven cents at C$12.34.