The Toronto Stock Exchange's S&P/TSX composite index ended down 167.46 points, or 0.9%, at 19,572.24, its lowest closing level since March 24. For May, it lost 5.2%, its biggest monthly decline so far in 2023.
"The overriding theme remains inflation and interest rates," said Michael Sprung, president at Sprung Investment Management.
"It certainly sounds like another increase in the U.S. would not be out of the question and that would put Canada in a position where it would have to follow suit."
U.S. stocks also fell as investors weighed the impact of unexpectedly strong labor market data on the Fed policy outlook.
Separate data showed that Canada's economy grew 3.1% in the first quarter, faster than expected, bolstering bets for another BoC rate hike.
"The one bright light is that you can pick up some pretty attractive yields right now, particularly on the financials and a number of the utilities," Sprung said.
Heavily weighted financials fell 1.1%, with National Bank of Canada down 2.8% after the bank missed earnings estimates.
Energy lost 2% as weak economic data from top oil importer China pressured crude prices. U.S. crude oil futures settled nearly 2% lower at $68.09 a barrel.
Shares of Centerra Gold Inc surged 9.8% after the bullion miner said it received an official approval for its Öksüt mine in Turkey.
Teck Resources Ltd shares gained 2.3% after a report saying that Glencore Plc was working on a potential improvement to its bid for the Canadian miner.
(Reporting by Fergal Smith in Toronto and Johann M Cherian and Vansh Agarwal in Bengaluru; Editing by Shweta Agarwal and Richard Chang)
By Fergal Smith
