The S&P/TSX composite index fell 52.58 points to 12,215.43 as investors nibbled on profits from last week's 2.66 per cent gain, while the TSX Venture Exchange was off six points to 1,270.71.
The Canadian dollar was up 0.07 of a cent to a one-year high of 102.3 cents US as copper prices added to Friday's sharp run up on stimulus hopes.
The loonie was also supported by the hawkish stance of the Bank of Canada. The central bank left its key rate unchanged at one per cent last week and repeated language indicating rates will likely rise at some point in the future.
U.S. markets were also lower after jobs data last week missed modest expectations, raising expectations the Fed will announce on Thursday another round of bond buying, known as quantitative easing, to help lower interest rates and thus boost loan growth.
"Fed fumes is how I’ve referred to it," said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
"It’s abundantly clear right now that the markets are being powered by expectations of what central banks are going to do."
The Dow Jones industrial average closed down 52.35 points to 13,254.29 while the Nasdaq composite index fell 32.4 points to 3,104.02. The S&P 500 index slipped 8.84 points to 1,429.08.
Losses picked up after the late afternoon announcement that Americans cut back on their credit card use in July for the second straight month, suggesting many remain cautious in the face of high unemployment and slow growth.
The Federal Reserve says total borrowing dipped US$3.3 billion in July from June to a seasonally adjusted $2.705 trillion.
Traders were also cautious as data released Monday showed that China's economic slump is worsening.
Imports declined 2.6 per cent from a year earlier, below analysts' expectations of growth in low single digits. That came on top of August's decline in factory output to a three-year low and other signs growth is still decelerating despite repeated stimulus efforts.
A slowing Chinese economy is particularly bad news for commodity prices and stocks on the resource-intensive Toronto stock market.
Analysts expect Chinese growth fell to a three-year low of 7.6 per cent in the latest quarter.
In a speech to the Asia Pacific Economic Co-operation meeting in Vladivostok, Russia, Chinese President Hu Jintao gave no growth forecast or details of possible new stimulus but promised to continue a "proactive fiscal policy," or government spending to pump up the economy.
Gold stocks led TSX decliners as bullion pulled back $8.70 to US$1,731.80 an ounce. Iamgold Inc. (TSX:IMG) faded 32 cents to C$13.46 while Goldcorp Inc. (TSX:G) gave back 85 cents to $41.21.
The base metals segment lost early gains to slip 0.46 per cent even as hopes for further stimulus measures from central banks pushed copper prices to a 17-week high. The December contract in New York was ahead five cents to US$3.69 a pound, adding to a 13-cent jump on Friday.
"Copper is a China story," added Fehr, noting China is the world’s biggest consumer of the metal watched as an economic barometer as it is used in so many industries.
"(China) will post a pretty good number in 2012 and if indeed we’re going to get more easing out of the Chinese central bank, that will only provide additional support for internal demand."
Sherritt International (TSX:S) rose 24 cents to C$4.68 while Thompson Creek Metals Co. (TSX:TCM) fell 16 cents to $3.07.
The energy sector was 0.1 per cent lower with oil prices higher for a fourth session. The October crude contract on the New York Mercantile Exchange was up 12 cents to US$96.54 a barrel. Cenovus Energy (TSX:CVE) dropped 27 cents to C$33.95.
Talisman Energy Inc., (TSX:TLM) shares ran up 22 cents to $14.09 as the company said that John Manzoni has agreed to step down as president and chief executive. He's being replaced by Hal Kvisle, a former CEO of TransCanada Corp. (TSX:TRP) who is already a Talisman director.
The telecom sector was the best advancer, up 0.49 per cent with Telus Corp. (TSX:T) ahead 56 cents to $62.32.
BCE (TSX:BCE) was up 12 cents to $44.26 as it said it will launch a made-in-Canada competitor to Netflix, available in English and French. CEO George Cope made the announcement at a CRTC hearing in Montreal into Bell’s $3.4-billion acquisition of Astral Media.
BCE also said Monday it will divest 10 radio stations in five markets as part of the deal to acquire Astal.
A major TSX loser was Ottawa-based nuclear medicine company Nordion Inc. (TSX:NDN) which lost a arbitration ruling to Atomic Energy of Canada Ltd. Nordion shares plunged $3.82 or 36.52 per cent to $6.64 after falling as low as $5.38 as the company also said it would suspend its quarterly dividend and stop buying back shares on its stock buyback plan.