The S&P/TSX composite index declined 113.69 points to 12,109.89 on top of a 159-point slide on Tuesday.
There was also news of a major acquisition in the grocery business after the close.
Empire Company Limited (TSX:EMP-A) and its wholly-owned subsidiary, Sobeys Inc. announced that they are buying rival Canada Safeway Ltd. for $5.8 billion in cash. Empire shares had closed down 97 cents at $67.61.
The Canadian dollar lost early momentum to close down 0.23 of a cent at 97.92 cents US.
U.S. indexes also erased early gains to post big losses. The Dow shed an early triple-digit advance to move down 126.79 points to 14,995.23, the Nasdaq dropped 36.52 points to 3,400.43 and the S&P 500 index declined 13.61 points to 1,612.52.
The TSX tumbled Tuesday after Japan’s central bank failed to deliver expected measures to ease bond market volatility. Instead, the bank only upgraded its economic outlook.
There has also been concern about whether the U.S. Federal Reserve will ease its monetary stimulus. The Fed has been buying bonds to push down market interest rates, which has helped fuel a strong rally on U.S. markets since late last year.
Speculation that the Fed will begin to wind down its quantitative easing program has also had the effect of pushing U.S. Treasury yields sharply higher, which in turn has had a negative effect on TSX defensive sectors such as real estate, utilities, telecoms and pipelines.
The utilities component was the biggest percentage decliner Wednesday, down 2.17 per cent as Algonquin Power & Utilities (TSX:AQN) shed 25 cents to $7.24.
The telecom sector was also a major weight, down 1.84 per cent and BCE Inc. (TSX:BCE) fell $1.15 to $43.95.
Commodity prices were higher but the energy sector lost 1.34 per cent even as the July crude contract on the New York Mercantile Exchange gained 50 cents to US$95.88 a barrel. Canadian Natural Resources (TSX:CNQ) gave back 53 cents to C$29.
July copper was up three cents to US$3.23 per pound after worries about Chinese growth helped send the metal down 17 cents over the previous four sessions. Uncertainty about China’s recovery has weighed on markets following weekend data showing exports, retail sales and other indicators weaker than expected.
"They’re trying to move more to sustainable development, not at all costs," observed Wes Mills, chief investment officer at Scotia Asset Management PM Advisor Services.
The TSX base metals sector slipped 1.5 per cent and Teck Resources (TSX:TCK.B) shed 70 cents to C$24.06 .
Cliffs Natural Resources Inc. (NYSE:CLF) said it was calling a temporary halt to its environmental assessment activities for a major chromite mine in the Ring of Fire region in remote northern Ontario. The company says the suspension is due to delays related to the environmental process, land surface rights and negotiations with the Ontario government about building infrastructure in the fly-in-only region. Its shares were 13 cents lower at US$17.37.
The financial sector fell about one per cent with Manulife Financial (TSX:MFC) down 35 cents to $15.80.
The gold sector was the only advancer, up a bit over one per cent as August bullion on the Nymex gained $15 to US$1,392 an ounce. Barrick Gold Corp. (TSX:ABX) improved by 20 cents to C$20.19.
The overall rally on U.S. markets this year has bypassed the TSX, which has been depressed by a mining sector weighed down by falling commodity prices amid a weak global economic recovery. Gold miners have also been a major weight as lower inflation concerns have depressed gold stocks and bullion prices.
Energy stocks have suffered because of demand concerns and worries about the future of major pipeline projects such as Keystone XL, which would move greater amounts of oilsands crude to American markets.
"Until we get word on Keystone and some of these bottlenecks, Canada will suffer on that side," Mills said.
"Really, if you look at the earnings growth by sector, energy and materials earnings growth is negative and that’s the whole story."
The TSX is down around 300 points or 2.6 per cent year to date and has finished lower in eight of the past nine sessions.
In corporate news, Hudson’s Bay Co. (TSX:HBC) lost $80.7 million in the latest quarter including discontinued operations, down from a loss of $129.7 million in the first quarter of 2012. Revenue rose by 4.2 per cent to $884 million. Hudson’s Bay stores in Canada enjoyed same-store sales growth of 7.6 per cent, offset by a 1.4 per cent decline at Lord & Taylor stores in the United States. Its shares inched up two cents to $16.18.
Dollarama Inc. (TSX:DOL) says the addition of 85 stores over the past year and strong growth at established locations helped push up revenue by 12 per cent to $448 million in the latest quarter. The Montreal-based discount chain also reported higher profits of $45.6 million or 62 cents per share, but that missed estimates of 67 cents. Its shares fell $2.45 to $70.13.