Toronto's S&P/TSX composite index fell 55.23 points to close at 13,932.97, with nearly all sectors lower.
On Wall Street, the declines were more dramatic, with the Dow Jones Industrial Average dropping to a five-week low.
And the Canadian dollar inched above 90 cents US after sliding below the mark for the first time since mid-2009 earlier in the session. The loonie closed 0.09 of a cent lower at 90.10 cents US.
A preliminary reading of HSBC's purchasing managers' index for China dipped this month to 49.6, the lowest level since July. Numbers below 50 indicate contraction.
"Chinese economic growth remains impressive from an absolute sense, but the rate of growth has been waning and that has implications for commodity prices and therefore commodity producers," said Tim Caulfield, a vice-president and director of equity research at Franklin Bissett Investment Management.
"Commodity prices are holding in amid the Canadian dollar weakness, which is a best-case scenario for commodity exporters."
The March crude oil contract on the New York Mercantile Exchange gained 59 cents to settle at US$97.32 a barrel, its highest level so far this year. The TSX energy sector was down 0.01 per cent.
February gold bullion rose $23.70 to US$1,262.30 an ounce, helping to drive the TSX gold sector higher.
Barrick Gold (TSX:ABX) gained nearly three per cent to C$21.43 while Agnico Eagle Mines (TSX:AEM) rose 7.2 per cent to $33.91.
Copper fell five cents to US$3.29 a pound.
In New York, the Dow dropped 175.99 points to end at 16,197.35, while the Nasdaq shed 24.13 points to 4,218.87 and the S&P 500 index was off 16.40 points at 1,828.46.
Several U.S. companies were lower after reporting quarterly results, including KeyCorp, Johnson Controls and Jacobs Engineering.
In economic data, Statistics Canada says retail sales rose 0.6 per cent in November to $41 billion, the fourth increase in five months.
Separately, it reported that 512,300 people were getting regular employment insurance benefits in November, a number virtually unchanged from October.
Dorel Industries Inc. (TSX:DII.B) is closing an assembly and testing facility in Pennsylvania and moving a research and development unit in Connecticut in a cost-reduction effort at its recreational and leisure business, which makes bicycles. Dorel says about 100 employees will be affected globally. The company's shares were down six cents at $41.15.
Shares in Canadian cheesemaker Saputo Inc. (TSX:SAP) rose seven cents to $52.76 as it emerged victorious in a bidding war for Australia's oldest dairy processor, Warrnambool Cheese and Butter. The Murray Goulburn Co-Operative is selling its shares to Saputo and expects to receive at least AU$92.8 million cash in return.
McDonald's Corp. earned $1.4 billion, or $1.40 per share, in the fourth quarter, which is a penny more than Wall Street expected. The world's biggest hamburger chain also reported that global sales slipped 0.1 per cent at established locations. In the U.S., where it recently revamped its Dollar Menu, the figure fell 1.4 per cent.
McDonald's shares gained 44 cents to US$95.32.
Target Corp. (NYSE:TGT) says it's laying off 475 employees worldwide, adding to the 700 positions it has eliminated over the past six months. The decision comes nearly two weeks after the retailer lowered its fourth-quarter profit outlook as it grapples with the fallout of a massive security breach. Shares of the retailer fell 56 cents to $58.65.
Netflix (Nasdaq:NFLX) shares jumped 16.5 per cent to US$388.72. After the closing bell Wednesday, the streaming video company reported fourth-quarter earnings had climbed six-fold and that it had added 2.3 million subscribers in the period.