The S&P/TSX composite index tumbled 150.61 points to 14,952.5 as the U.S. Labor Department announced that the economy created 295,000 jobs in February, much higher than the 245,000 jobs that economists had expected.
Canadian employment data for February will be released on March 13.
The Canadian dollar fell 0.66 of a U.S. cent to 79.3 cents as the greenback appreciated following the release of the U.S. jobs data.
New York's Dow Jones industrials fell 278.94 points to 17,856.78, the Nasdaq declined 55.44 points to 4,927.37 and the S&P 500 index was 29.78 points lower at 2,071.26.
"You're seeing a knee-jerk reaction to the downside," said Allan Small, a senior adviser at HollisWealth.
"People are saying OK, maybe the Fed is going to raise rates mid-year, talk was maybe September. But you can clearly see that rates are going to rise. And I think the market can handle it but I think this is just an excuse for traders to take profits."
Other data showed that U.S. wage growth in February was up just 0.1 per cent.
Analysts said wage increases would be the most closely watched data from the U.S. employment report. The slow pace of wage growth has been a disappointment so far.
Stronger wage growth would likely add to pressure on the Fed to raise borrowing rates this year for the first time since the 2008 global financial crisis. Analysts believe the Fed could move to hike rates as early as June.
Resource stocks were a major weight on the TSX as a rising American currency also pressured commodity prices.
The gold sector was the major decliner, down 6.5 per cent as April bullion fell $31.90 to US$1,164.30 an ounce.
The base metals component shed 1.8 per cent as May copper was four cents lighter at US$2.61 a pound.
The energy sector was down 1.27 per cent as oil in New York was $1.15 lower at US$49.61 a barrel.
The financial group was the only advancer, up a slight 0.2 per cent.
On the corporate front, Ottawa has raised $2.11 billion in its latest auction of wireless spectrum. Telus (TSX:T) was the biggest buyer, paying over $1.5 billion for 15 licences. Its shares were down 37 cents at $43.43.
The TSX finished lower last week, down 1.85 per cent with mining and financial stocks being the major contributors to the slide, as a largely desultory earnings season came to a close with an earnings miss from Bank of Nova Scotia.