The resource-intensive S&P/TSX composite index gave up a gain of about 80 points to inch up 0.58 of a point to 11,497.87, as traders focused on Spain and Italy and the higher borrowing costs both countries are facing. The TSX Venture Exchange lost 25.83 points to 1,243.88.
The Canadian dollar ticked 0.24 of a cent higher to 97.16 cents US.
U.S. markets were lower as data for May showed retail sales dropped by 0.2 per cent. But most of the weakness was focused in a drop in gasoline prices.
The Dow Jones industrials closed down 77.42 points to 12,496.38, the Nasdaq composite index slipped 24.46 points to 2,818.61 and the S&P 500 index lost 9.3 points to 1,314.88.
The TSX had earlier rallied for a second day, on top of a rise of more than one per cent last week. Buyers have been moving cautiously to buy up stocks that were beaten down in a string of sharp declines last month that left the TSX more than 10 per cent below its 2012 highs at the end of February.
But losses in the energy sector piled up during the afternoon as the July crude contract on the New York Mercantile Exchange closed down 70 cents at US$82.62 a barrel on demand concerns. Data released Wednesday morning showed a drop in inventories of about 200,000 barrels last week, far below the two million that analysts had expected.
The sector lost 1.11 per cent and Canadian Natural Resources (TSX:CNQ) shed 54 cents to C$27.12.
Oil and gas producer Enerplus Corp. (TSX:ERF) cut its dividend in half on Tuesday to a monthly payment of nine cents per share from 18 cents amid weaker oil and natural gas prices. Its stock gave back 51 cents to $13.01.
The telecom sector was also a major decliner, down about one per cent with Rogers Communications (TSX:RCI.B) down 27 cents to $35.07.
The base metals group shed early losses and moved up two per cent with July copper unchanged at US$3.34 a pound. Teck Resources (TSX:TCK.B) rose 51 cents to C$32.32.
The financial sector gained about 0.6 per cent with TD Bank (TSX:TD) ahead 90 cents to $79.
The gold sector rose about 0.2 per cent as bullion prices gained $5.60 to US$1,619.40 an ounce. Goldcorp Inc. (TSX:G) gained 77 cents to C$41.23.
Eurozone debt worries were in focus as traders worry that the €100 billion being made available to Spain to aid its banks will just add to the government’s already considerable debts and perhaps force it to seek its own sovereign bailout.
"It has been nothing from day one out of Europe where it hasn’t been a reactionary response," said Chris Kuflik, investment adviser with ScotiaMcLeod in Montreal, adding that it is mildly encouraging the eurozone is taking some necessary steps.
"They have to solve the problem once and for all and it’s going to take some hard decisions. They have to, at some point, provide some sort of a guarantee, like what the U.S. did where they upped the limits of depositor guarantee so that there wasn’t money flooding out of the banks."
The lack of confidence has been expressed in bond markets where Spain has been forced to pay higher yields to attract buyers for its debt. The yield on Spain's benchmark 10-year bond had hit a euro-era high of 6.72 per cent but dropped slightly Wednesday.
The spike in the yield followed a Fitch Ratings downgrade of 18 Spanish banks, predicting the weakness of the Spanish economy would continue having a negative effect on business.
Spanish contagion has spread to other heavily-indebted countries. Italy paid 3.972 per cent interest rates — up from 2.34 per cent last month — to sell €6.5 billion in 12-month paper. The bond auction enjoyed strong demand. The sale was a warm-up for Thursday’s weightier longer-term paper auction.
Investors are also nervously awaiting Greek elections on Sunday when a party that’s threatening to renege on the country’s bailout terms could come away the big winner. That might force Greece out of the eurozone, causing upheaval in currency markets.
On the earnings front, discount retailer Dollarama Inc. (TSX:DOL) said its first-quarter profit rose 40 per cent to $42.6 million or 56 cents a share, which beat estimates by six cents. The Montreal-based company’s revenue for the 13 weeks ended April 29 was just under $398 million, up 15 per cent from the comparable period last year and its shares ran ahead $3.74 or 6.58 per cent to $60.61 after earlier hitting an all time high of $61.23.
Elsewhere, shares in logistics software company Descartes Systems Group (TSX:DSG) rose 25 cents to $8.46 after it said Wednesday it has signed a deal to buy Integrated Export Systems, Ltd. and IES Asia Ltd. for US$35 million in cash.