The S&P/TSX composite index fell 66.16 points to 15,346.44 following a gain that exceeded more than 50 points on Monday.
The Canadian dollar retreated for a third consecutive session after some impressive gains last week, closing down 0.34 of a U.S. cent at 81.43 cents.
New York markets were mostly lower amid a mixed bag of earnings reports as investors tried to gauge the effect of the higher U.S. dollar on corporate profits.
The Dow Jones industrial average was down 85.34 points at 17,949.59 after a plunge of more than 200 points Monday, while the S&P 500 shed 3.11 points to 2097.29. Meanwhile, the Nasdaq advanced 19.50 points to 5,014.10.
On the commodity markets, the June crude contract closed down $1.27 at US$56.61 a barrel, while June gold rose $9.40 to US$1,203.10 an ounce and May copper fell three cents to US$2.70 cents a pound.
"The volatility that we've been experiencing . . . to me it's the market just being the market," said Kash Pashootan, senior vice-president and portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company.
"The reason why we're scratching out heads trying to determine where this volatility is coming from is primarily because we haven't seen very much of it over the last four or five years."
After five years of above historical average returns, especially the U.S. market, and with equities fully valued, investors are not likely to be as patient with anything "other than perfection," Pashootan said.
"In many ways it's healthy to see this type of volatility at this point in the cycle because if we didn't have this volatility, we face the risk of stocks getting ahead of themselves and becoming over-valued and potentially building the next bubble that at some point will pop."
In corporate news, Teck Resources Ltd. (TSX:TCK.B) reported adjusted quarterly earnings of $64 million or 11 cents per share, down 40 per cent from $105 million or 18 cents per share a year earlier and three cents below the average analyst estimate as compiled by Thomson Reuters.
Meanwhile, Teck announced a two-thirds cut in its dividend in response to current low commodity prices and the diversified miner's outlook. It's stock close down $1.09 or 6.44 per cent at $15.83.
Canadian National Railway (TSX:CNR), which reported higher quarterly earnings after markets closed Monday, saw its shares drop $2.57 or 3.08 per cent $80.78
And Canadian Pacific Railway, which reported an all-time quarterly profit of $320 million on Tuesday, nonetheless saw its shares drop $5.14 or 2.17 per cent to $232.12.
"You're seeing cautious profit-taking when it come to the rails as a result of the combined forces of these stocks not being under-valued and, arguably, a little bit expensive" at a time when investors are uncertain of the effect big drop in oil prices will have on the Canadian economy in the short to medium term, Pashootan said.