The S&P/TSX composite index pulled back 284.11 points or 1.93 per cent to close at 14,469.95.
Energy stocks dropped 4.1 per cent as the January crude oil contract on the New York Mercantile Exchange fell 67 cents to $66.76 US.
Oil was hammered by news that Saudi Arabia had reduced January prices to U.S. and Asian customers and was anticipating oil prices could go as low as $60 a barrel.
Financial stocks fell after TD Bank released a disappointing earnings report. TD Bank earnings were up three per cent to 98 cents a share, but investors had anticipated $1.05 a share.
The bank also said it was anticipating slow growth in 2015.
CIBC, which also reported today, fell 3.4 per cent after its profit fell to $811 million, and Bank of Nova Scotia, which has yet to report, also was pushed down.
Investors may be nervous about the potential effect on banks of an interest rate hike some time in 2015. Some analysts believed Bank of Canada governor Stephen Poloz's assessment of the Canadian economy yesterday was more bullish than usual, an indication the Bank of Canada may move sooner than expected to raise rates.
Accelerating the TSX pullback was the looming deadline for tax-loss selling in the final week of December, which has likely motivated some sell-off decisions from investors, said Ron Meisels, president of Phases and Cycles in Montreal.
"Energy stocks are still the ones that are getting hammered, the price of oil is influencing the market, so generally speaking we see all of that coinciding," he said.
The Canadian dollar fell 0.07 of a cent to 87.91 cents US.
No European stimulus
In New York, the Dow Jones industrial average was off 12.52 points to 17,900.10. The Nasdaq moved up 5.03 points to 4,769.44, while the S&P 500 index lost 2.41 points to 2,071.92.
Many investors were disappointed that the European Central Bank did not introduce new stimulus measures this morning, but left its interest rate unchanged.
The ECB expects to make a decision about stimulus, possibly through a quantitative easing program, early next year after it assesses the effects of sharply lower oil prices, central bank president Mario Draghi said Thursday.
Draghi is facing skepticism within the board of the ECB — particularly from German officials — on whether to approve a more drastic stimulus program.
In the meantime, the EU is dogged with slow growth. Investors had hoped for a plan that would inject more money into the European economies.