The S&P/TSX composite index dropped 136.35 points to 15,129, after closing down 200 points on Friday. Base metals, gold and energy were among the heaviest weights on the Toronto exchange.
The Canadian dollar lost 0.70 of a cent to 90.65 cents US against a strengthening U.S. dollar.
U.S. markets were also in negative territory with the Dow Jones industrials down 107.06 points to 17,172.68. The Nasdaq fell 52.10 points to 4,527.69 and the S&P 500 index lost 16.11 points to 1,994.29.
Craig Fehr, a Canadian market strategist at Edward Jones, said it was time for investors to prepare for a return to volatility on markets.
"We've been in an environment for the past couple of years where volatility has been well below average and I think that even with the return to a normal type of market volatility or fluctuations it is going to be a little bit of an adjustment for investors who didn't have to deal with that . . . for a couple of years," Fehr said from St. Louis.
"Investors should reposition their portfolios . . .(amid) expectations for higher volatility."
Traders are looking ahead to the latest Chinese economic growth data with the release Tuesday of HSBC's gauge on China's manufacturing. The report is expected to show renewed weakness in the world's second-largest economy amid a recent spate of soft data. If the index falls near or below 50, it would indicate that China's manufacturing is barely growing or possibly even contracting.
In economic news, fewer Americans bought homes in August as investors retreated from real estate and first-time buyers remained scarce.
The National Association of Realtors says sales of existing homes fell 1.8 per cent to a seasonally adjusted annual rate of 5.05 million last month. That snaps a four-month streak of gains with August sales down from a July rate of 5.14 million.
The decline came from the exodus of investors who had been buying properties in the aftermath of the housing bust and recession. Overall, the pace of home sales has dropped 5.3 per cent year over year.
Commodities were mixed with December copper fading five cents to US$3.04 a pound and the November crude contract dipped 78 cents to US$90.87 a barrel. December gold bullion added $1.30 to US$1,217.90 an ounce.
In corporate news, BlackBerry (TSX:BB) plans to sell its new Passport smartphone for US$599 without a wireless carrier contract in the U.S., about $50 to $250 cheaper than various models of the iPhone 6 and Samsung's Galaxy S4 currently on shelves.
The price could give BlackBerry an advantage as it works to secure large orders of the device from corporate customers and plans to sell the phone at wireless stores. Canadian prices for the BlackBerry Passport haven't been officially released. Shares in BlackBerry gained 16 cents to $12.05 on the Toronto Stock Exchange.
Meanwhile, oil and gas company Veresen Inc. (TSX:VSN) says it's spending more than US$1.4 billion to buy a stake in a U.S. pipeline, which it says will bolster plans to ship natural gas from a proposed terminal in Oregon.
The Calgary-based company says it'll be buying a 50 per cent stake in the Ruby pipeline system from Global Infrastructure Partners. The Ruby pipeline runs nearly 1,100 kilometres from Wyoming to Oregon and has the potential to ship up to two billion cubic feet per day of gas. Its shares lost 26 cents to close at $17.17.
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