Toronto's S&P/TSX composite index plunged 193.53 points to 15,173.94 despite higher commodity prices that saw oil break through the US$60-a-barrel mark.
The loonie was up 0.14 of a U.S. cent at 82.84 cents.
In New York, the Dow Jones industrials dropped 142.20 points to 17,928.20, the Nasdaq plummeted 77.60 points to 4,939.33 and the S&P 500 declined 25.03 points to 2,089.46.
All sectors on the TSX were down, including the gold sector, off a little under one per cent even as the June gold contract rose $6.40 to US$1,193.20 an ounce.
"The metal has rallied but the stocks are being left behind," said Roland Chalupka, chief investment officer at Fiduciary Trust Canada, the wealth management arm of Franklin Templeton Investments Corp.
"It's a little bit unusual. Typically in the metals and mining area, you've got a pretty direct relationship between the underlying commodity and the actual stocks."
Chalupka said gold stocks could be facing downward pressure despite rising commodity prices because investors are worried that the cost of financing will climb when the U.S. Federal Reserve raises interest rates.
The June crude contract was up $1.47 at US$60.40 a barrel.
In economic news, trade deficits in both Canada and the U.S. grew in March, with the Canadian gap hitting a record $3 billion as the drop in oil prices weighed heavily on exports.
In the U.S. the trade deficit rose to $51.4 billion, the most since October 2008 as a small increase in exports was overwhelmed by a big increase in imports.
"The trade deficit story is important, and probably driving most of what's happening today," Chalupka said. "Canadians continue to import, and they show no signs of spending slowing down, but we're not exporting as much, so our deficit widened out."
North American markets have performed rather poorly since the start of the second quarter in April, Chalupka said. Economic activity has been generally soft on both sides of the border, corporate earnings have been lacklustre and Europe has been unable to shake concerns over the Greek debt crisis.
"Europe, which is seen as somewhat of a leading light in that they started their quantitative easing program in January on high hopes and high expectations, they're starting to bump into more political risk with this Greece situation that doesn't seem to want to go away," Chalupka said.
Meanwhile, shares of WestJet were down more than three per cent to $27.24. The Calgary-based airline reported its net income grew 58 per cent in the first quarter as fuel prices, one of the company's biggest expenses, declined.
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