The S&P/TSX composite index had registered a solid advance in morning trading after a string of losses, but the main index ended the session down 77.85 points at 14,187.16.
The Canadian dollar rose 0.09 of a cent to 83.65 cents US.
A relief rally also stalled in New York where the Dow industrials fell 27.16 points to 17,613.68, the Nasdaq gave back 3.21 points to 4,661.5 and the S&P 500 index was down 5.23 points at 2,023.03.
The base metals sector was the biggest decliner, plunging 9.25 per cent while March copper fell eight cents to US$2.65 a pound amid mixed economic news from China. Exports from the world's second-largest economy rebounded in December but imports shrank in a sign of weak domestic demand.
Chinese demand for imported oil, iron ore, food and other goods has cooled as economic growth has slowed. Copper prices have plunged 20 per cent over the last year to 2009 lows. Major losers included First Quantum Minerals (TSX:FM), which tumbled $2.35 or 14.85 per cent to $13.47, and Teck Resources, which was 93 cents lower at $14.66.
The gold sector was down five per cent even as investors seeking safety sent bullion prices higher for a third day. The February contract gained $2.60 to US$1,235.40 an ounce.
Goldcorp Inc. (TSX:G) was down $1.41 to C$24.31 as the miner warned that it may be required to write down the value of its Cerro Negro in Argentina by up to US$2.7 billion. It says the mine faces a number of challenges that are affecting its long-term value, including foreign exchange restrictions and inflation in the country.
The energy sector had a rare positive session, up 0.35 per cent while oil prices continued to decline after the United Arab Emirates’ oil minister, Suhail Mohamed Faraj al-Mazrouei, said Tuesday that the Organization of the Petroleum Exporting Countries will stick to its decision to keep oil output unchanged regardless of current oil prices.
Oil in New York declined 18 cents to US$45.89 a barrel, its lowest level in almost six years. A huge glut of oil has sent prices tumbling almost 60 per cent from recent highs registered in June 2014. Analysts anticipate it will take months to work out the huge supply/demand imbalance.
The energy sector has fallen 10 per cent so far this month after a 20 per cent plunge for 2014. While the slide makes prices of energy stocks more attractive, analysts think it far too early to pick up bargains in the group.
Brian Belski, chief investment strategist at BMO Capital Markets, said markets have yet to price in the fact that this is not a temporary correction in oil prices. Rather, "we believe the recent decline in oil prices is not short term, as the perfect storm of slowing emerging market growth and expanding North American supply equates to a dramatic reversal of fortunes for the sector."
Belski believes energy sector earnings are likely in for "a prolonged period of stagnant growth" and that more earnings downgrades are likely in store.
Other big decliners included financials and industrials, both down about one per cent.
Traders looking for safety sent telco and consumer staples stocks higher.