The S&P/TSX composite index lost 89.91 points to 15,081.32 as resource stocks fell alongside prices for oil and gold.
The Canadian dollar was off 0.38 of a cent to 92.95 cents US.
New York indexes were lacklustre after Federal Reserve chair Janet Yellen said in delivering the Fed’s latest economic report to Congress that the economic recovery is not yet complete and the central bank intends to keep providing significant support. But she also said if labour market conditions continue to improve more quickly than anticipated, the Fed could raise rates sooner than currently projected — the summer of 2015.
The Dow Jones industrial gained 5.26 points to 17,060.68, while the Nasdaq fell 24.03 points to 4,416.39 and the S&P 500 index was off 3.82 points at 1,973.28.
The Fed's report also pointed out that some broad equity price indexes have increased to all-time highs in nominal terms since the end of 2013.
It observed that "valuations in some sectors do appear substantially stretched, particularly those for smaller firms in the social media and biotechnology industries."
By suggesting some stocks could be overvalued, the Fed is adding to a growing belief among some market watchers that the market is due for a pullback, said Drew Wilson, an equity analyst at Fenimore Asset Management.
Earlier, investors digested data that showed U.S. retail sales for June rose by 0.2 per cent, less than the 0.6 per cent gain that had been expected.
Traders also focused on another round of strong earnings from the U.S. financial sector as JPMorgan Chase and Goldman Sachs both beat analyst expectations in the most recent quarter.
JPMorgan Chase posted second-quarter profit of US$1.46 a share versus the $1.29 a share that analysts had expected and its shares rose 3.52 per cent to US$58.27.
And Goldman Sachs reported quarterly earnings per share of US$4.10 versus $3.70 a year ago, handily beating expectations of $3.05 a share. Its shares gained 1.3 per cent to US$169.17.
After the close, Yahoo reported earnings per share ex-items of 37 cents, a cent below expectations.
The gold sector was the biggest percentage decliner, down about 2.6 per cent as August bullion erased early gains to move down $9.60 to US$1,297.10 an ounce after falling $30 on Monday.
The base metals group was right behind, down 2.4 per cent as September copper was unchanged at US$3.25 a pound.
The energy component dropped 1.8 per cent as oil prices fell below US$100 a barrel for the first time since May in the wake of the American retail numbers. August crude on the New York Mercantile Exchange dropped 95 cents to US$99.96. Prices have dropped sharply over the last week as worries about supply disruptions from Iraq eased and on the prospect of more supplies from Libya.
Meanwhile, weaker than expected economic data for the first half of the year prompted the International Energy Agency and other experts to trim their forecasts for short- and medium-term demand. Crude has dropped five per cent so far this month.
However, Sid Mokhtari, market technician at CIBC World Markets, noted that the energy sector is a star performer so far this year on the TSX, up about 18 per cent year to date.
"The sector has run a huge course and by the time the S&P/TSX energy sector reached its highs, you were almost back at the highs of 2011, when the complex came under severe pressure," he said.