The S&P/TSX composite index dropped 130.20 points to 15,133.85 on declines across nearly every major sector.
The Canadian dollar rose 0.28 of a U.S. cent to 80.06 cents ahead of the Bank of Canada's key interest rate decision on Wednesday morning.
Data Tuesday from Statistics Canada, which showed the economy grew at an annualized pace of 2.4 per cent in the fourth quarter of 2014, came in better than the two per cent forecast by analysts surveyed by Thomson Reuters.
That signals it's unlikely the Bank of Canada will cut its key interest rate on Wednesday, said Todd Mattina, chief economist and strategist at Mackenzie Investments.
"We're not seeing a strong rebalancing towards business investment in exports, away from the energy sector," he said.
Meanwhile, TSX financial stocks were a major drag on the market, down 1.14 per cent, after Scotiabank (TSX:BNS) delivered profits that disappointed.
Scotiabank, the last of the big five Canadian banks to report first-quarter results, said net earnings were $1.73 billion, up from $1.71 billion in the comparable year-earlier period. Adjusted earnings were $1.36 per share, two cents lower than analysts predicted.
The bank's chief executive, Brian Porter, said he's looking to grow the bank's operations in Mexico and told analysts on a conference call that Scotia executives believe Mexico's banks are headed for consolidation. Porter said that Scotia would be "very interested" in looking at a commercial bank or a retail bank in the region.
Shares of the bank fell $1.15 or 1.72 per cent to $65.78.
Elsewhere, metals and mining stocks were lower as May copper fell 4.1 cents to US$2.66 a pound.
Gold stocks pulled back with April bullion down $3.80 to US$1,204.40 an ounce.
Energy stocks were the sole gainer, rising 1.05 per cent, as the April crude oil contract rose nearly two per cent, or 93 cents, to settle at US$50.52 a barrel.
On Wall Street, the Dow Jones industrials moved back 85.26 points to 18,203.37 and the S&P 500 index lost 9.61 points to 2,107.78. The Nasdaq slid 28.20 points to 4,979.90.
Traders will look towards the central bank's rate decision on Wednesday morning for more insight into the outlook for the coming months.
While the BoC isn't expected to make another rate cut this time around, commentary from BoC governor Stephen Poloz will offer some direction, said Mattina.
He suggested efforts so far from Poloz haven't been strong enough, as the loonie is holding steady and the January rate cut has only been partially passed down to consumer lending.
"I think it's going to be very important to see how they explain not cutting tomorrow and what forward guidance they give for the next rate cuts," he said.
In corporate developments, BlackBerry (TSX:BB) unveiled its latest smartphone at the Mobile World Congress wireless show in Barcelona, offering a look at the first of four new smartphones it plans to release this year.
Chief executive John Chen said the BlackBerry Leap will cater to the "low-to-mid" range phone market, and will go on sale in Europe in April.
BlackBerry shares moved down 18 cents or 1.3 per cent at $13.69 on the Toronto Stock Exchange.
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