The S&P/TSX composite index slid 31.76 points to 12,360.18, while the TSX Venture Exchange was off 6.56 of a point to 1,325.22.
The Canadian dollar fell 0.40 of a cent to 101.20 cents US.
Most of the losses came from the energy sector, which was down 1.2 per cent, with November crude on the New York Mercantile Exchange ending the session $3.75 lower at US$88.14 a barrel.
Crude prices have fallen to their lowest level in a month, weighed by concerns about the economic slowdown in Europe, China and the United States.
The gold sector was also weaker while December bullion rose $4.20 to US$1,779.80 an ounce, while December copper was down 1.7 cents at US$3.78 a pound.
However, there was some encouraging economic data from the U.S. that helped take some of the pressure off the decline. A report from payroll processor ADP said U.S. companies added 162,000 jobs last month, slightly better than consensus expectations, but down from August. The data indicated that growth isn't picking up momentum.
The Institute for Supply Management said its index of service companies, which includes everything from financial firms to clothing stores, rose in September to the highest level since March. The index reached 55.1. Economists had estimated it would drop to 53.4.
On Wall Street, the Dow Jones industrials were up 12.25 points to 13,494.61.
The Nasdaq composite index advanced 15.19 points to 3,135.23, while the S&P 500 index gained 5.24 points to 1,450.99.
North American stock markets have been moving cautiously this week ahead of the latest U.S. jobs data, due on Friday. Concerns about Spain's debt problems have extended traders' concerns that more European troubles could be on the horizon.
"You've got a market that's transfixed," said John Stephenson, senior vice-president and portfolio manager at First Asset Funds Inc.
"People are scared of missing out on the rally ... but by the same token they think that Europe isn't solved, so they've got a little bit of a bias to being light in the market. It's really a market where there's no catalyst."
Spain's prime minister indicated his cash-strapped country would not request an imminent bailout despite reports Tuesday that suggested otherwise.
Madrid is under pressure to ask for financial assistance from the European Central Bank to keep a lid on its borrowing costs but the government has been reluctant to do so because it may come with conditions on its budget policies. Germany is also pushing Spain to delay such a move because it is wary of presenting yet another rescue plan for a vote in parliament.
In Canadian news, a report from Royal LePage showed that the average price of a resale home in Canada rose between 1.8 and 4.8 per cent in the third quarter of 2012 compared to the same period last year. The cost of an average two-storey home in Canada increased four per cent to $403,747, while detached bungalows rose 4.8 per cent to $366,773.
Thompson Creek Metals (TSX:TCM) said it plans to reduce costs at its Thompson Creek molybdenum mine in Idaho by more than $100 million amid uncertainty in the world economy. Shares of the company decreased two cents to $2.61.
Hewlett-Packard also warned that its earnings and sales will face pressure in the coming quarters due to economic weakness. Its shares dropped 13 per cent in New York.
Quebecor Inc. (TSX:QBR.B) says it is taking advantage of low interest rates to buy back a substantial interest in its operating arm from the Caisse de depot et placement du Quebec in a transaction valued at $1.5 billion.
Under the deal, which involves the buyback of some 30.5 million shares, the Caisse's interest in Quebecor Media Inc. is being reduced to 24.6 per cent from 45.3 per cent. Shares of Quebecor were down 42 cents to $33.