The S&P/TSX composite index fell 155.91 points or 1.3 per cent to 11,704.74 in a broad-based retreat, having recovered somewhat from a loss of well over 200 points earlier in the day. The TSX Venture Exchange declined 59.05 points to 1,338.37.
The Canadian dollar fell 0.53 of a cent to 100.17 cents US after slipping below parity with the greenback earlier in the session, going as low as 99.77 cents US.
Traders avoided risky assets after a prominent Greek politician called on the country's two main party leaders to renege on their support for the multibillion-euro bailout that is keeping Greece afloat. Alexis Tsipras' Radical Left Coalition came in a surprise second in Sunday’s indecisive election and the country is struggling to form a new government.
"The popular mandate clearly renders the bailout agreement invalid," he said.
Voters punished the two parties that have overseen the country’s harsh austerity measures and left no party with enough votes to form a government. Now, another election looks increasingly likely for the country, which is being supported by bailouts.
But analysts warn that Greece could run out of money as soon as next month without a government to negotiate the next level of its financial bailout.
U.S. markets also retreated but finished well off the worst levels of the day. The Dow Jones average came back from a 198-point plunge to close down 76.44 points at 12,932.09.
The Nasdaq composite index slid 11.49 points to 2,946.27 and the S&P 500 index fell 5.86 points to 1,363.72.
Commodity prices lost ground because if Greece can’t stay solvent, it risks falling out of the eurozone, with potential knock-on effects throughout the global economy.
As it is, the economies of many heavily-indebted eurozone countries are worsening as tough austerity measures adopted to rein in spending are crushing growth.
"It highlights the bigger issue, which is that Europe has made some meaningful progress in addressing the capital issues of the banking system and reinforcing the banking system," said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.
"But they haven’t made the transition from the focus on austerity to the focus on growth and you can’t cut your way to prosperity."
Shares sank nearly seven per cent on the Athens Stock Exchange on Monday, and dropped a further 3.6 per cent Tuesday.
Commodities have also suffered in recent weeks because of indications of slowing economic performance in the U.S. and China.
The TSX energy sector lost 1.12 per cent as the June crude contract on the New York Mercantile Exchange fell 93 cents to US$97.01 a barrel. It earlier went as low as US$95.52, its weakest level since late December.
Crude has slumped about nine per cent since the beginning of the month on a deterioration of the global growth outlook. Canadian Natural Resources (TSX:CNQ) gave back 95 cents to C$30.69 and Suncor Energy (TSX:SU) was 45 cents lower at $29.77.
Copper prices are also down sharply from May 1, losing 4.3 per cent. The July contract was down 10 cents to US$3.68 cents a pound on Tuesday. Copper is viewed as an economic bellwether as it is used in so many industries. The base metals sector gave back 2.16 per cent and Teck Resources (TSX:TCK.B) declined 81 cents to C$33.53 while Ivanhoe Mines (TSX:IVN) lost 45 cents to $9.90.
Railway stocks fell alongside commodity prices and mining stocks, with Canadian National Railways (TSX:CNR) down $1.85 to $82.20 and Canadian Pacific Railway (TSX:CP) off 80 cents at $73.69.
The gold sector was also lower as bullion prices backed off, down $34.60 at US$1,604.50 an ounce, the lowest close since Jan 3. Goldcorp Inc. (TSX:G) faded $1.53 to C$34.40 and Barrick Gold Corp. (TSX:ABX) shed 96 cents to $36.71.
Blue chips also contributed to the negative showing with the financial sector down 1.2 per cent. Scotiabank (TSX:BNS) lost 57 cents to $53.02 and TD Bank (TSX:TD) eased $1.23 to $80.42.
On the corporate front, Research In Motion (TSX:RIM) gained 25 cents to $12 as the BlackBerry maker hired two veterans from the mobile computing industry for the key roles of chief operating officer and chief marketing officer.
There was also plenty of earnings news to digest.
Food company George Weston Ltd. (TSX: WN) said first-quarter net earnings attributable to shareholders grew 18 per cent to $124 million from $105 million in the quarter a year earlier. Sales increased one per cent to $7.22 billion from $ 7.15 billion a year ago but its shares dipped $1.35 to $59.13.
Molson Coors Brewing Co. (TSX:TPX.B) (NYSE:TAP) reported net income from continuing operations fell 3.9 per cent to US$79.4 million, or 44 cents per share. But underlying earnings rose to US$85.3 million, or 47 cents per share. Net sales were up 0.1 per cent to US$691.4 million. Its shares fell 61 cents to US$41.43 in New York
Yellow Media Inc. (TSX:YLO) plunged four cents or 40 per cent to six cents amid a first-quarter loss of $2.9 billion as the struggling directory publisher wrote down the value of its assets. The company also cancelled its annual meeting planned for Tuesday in Montreal after it said the number of shareholder votes received would not be enough to reach a quorum. Revenues were $289.1 million compared with $349.4 million for the first quarter in 2011. Excluding the one-time charge, the company earned $57.5 million.