The S&P/TSX composite index declined 53.32 points to 13,495.54, its third straight decline, as traders also awaited the start of the U.S. corporate earnings season.
The Canadian dollar was off 0.11 of a cent at 93.88 cents US.
U.S. markets were also firmly in the red as the Dow Jones industrials gave back 44.89 points to 16,425.1, the Nasdaq was down 18.23 points to 4,113.68 and the S&P 500 index was 4.6 points lower at 1,826.77.
On the economic front, U.S. factory orders rose 1.8 per cent in November, better than the 1.7 per cent gain that economists had forecast.
But the latest reading on the American non-manufacturing sector disappointed. The Institute for Supply Management's service sector index came in at 53, against the 55.1 reading that had been expected.
Investors will also start to focus on corporate earnings later this week when resource company Alcoa hands in fourth-quarter data.
Expectations have been lowered in recent months with earnings from S&P 500 companies expected to have risen 6.3 per cent in the fourth quarter. That’s slower than the 9.3 per cent growth analysts expected, on average, at the end of September, according to FactSet.
But that weak reading is at least partly balanced by rising optimism that an improving economic data will make for stronger corporate balance sheets in 2014.
"The indications seem to be supportive," said Patrick Blais, managing director and portfolio manager at Manulife Asset Management.
"If you look at the data, there is a lot of solid indications that this is the year where the U.S. economy will filter down to companies. This year, you will finally see private enterprise developments really drive the economy and therefore earnings."
Markets are also waiting mid-week to scrutinize the minutes of the Federal Reserve’s December meeting. The Fed announced at that meeting it would start to cut back its monthly US$85 billion of bond purchases by $10 billion starting in January.
Traders will look for indications of when the Fed will accelerate that tapering and for the central bank’s latest take on the economy.
The Fed said in December further tapering would be linked to the economic recovery, in particular employment growth, so Friday’s U.S. non-farm payrolls report is of special interest. Economists look for the economy to have created about 195,000 jobs in December.
"And job gains should keep on trending positively and we think that this is the year where we start seeing some pick up in wage gains and that will definitely filter into the economy in a very strong fashion," Blais said.
Canadian employment figures also come out on Friday, with the consensus calling for the economy to have cranked out 13,000 jobs in December.
Overseas, traders will take in the latest trade, inflation and loans data from China later in the week. Two surveys last week showed manufacturing activity weakened in December, which analysts said pointed to a downturn in the business cycle.
Financials were the biggest pressure point on the TSX, down 0.71 per cent as Scotiabank (TSX:BNS) turned 72 cents lower to $64.74 while Power Financial (TSX:POW) declined 62 cents to $35.12. Traders have taken some profits over the last week from financials, which ended 2013 up about 20 per cent on the TSX.
Industrials also weighed on the TSX, down 0.73 per cent as Canadian National Railways (TSX:CNR) gave back 81 cents to $59.27.
March copper was unchanged at US$3.36 a pound and the base metals sector was slightly lower. HudBay Minerals (TSX:HBM) was down 26 cents to C$8.46.
The energy sector was flat as the February crude contract on the New York Mercantile Exchange dropped 53 cents to a five-week low of US$93.43 a barrel. Cenovus Energy (TSX:CVE) gave back 36 cents to C$29.61.
Crude fell six per cent last week due to growing inventories in the U.S. and an expected recovery in Libyan production.
The tech sector led advancers with BlackBerry Ltd. (TSX:BB) (Nasdaq:BBRY) running ahead 42 cents to $8.51 on the TSX after the smartphone maker said it has hired Ron Louks, who has held senior positions at HTC America Inc. and Sony Ericsson, to help develop the company’s long-term product road map.
The TSX gold sector finished up about 0.65 per cent even as February bullion edged 60 cents lower to US$1,238 an ounce. The trading year is only days old but the gold component is already the best performer, up more than three per cent over the past week after plunging almost 50 per cent in 2013. Barrick Gold (TSX:ABX) improved by 27 cents to C$19.58.
But Kirkland Lake Gold (TSX:KGI) tumbled 40 cents or 13.33 per cent to $2.60 after it said it has launched a strategic review of the company, which it may include the potential sale of assets or offering of shares.