North American stock markets closed the day lower, but off their steepest losses on Wednesday, after the price of oil slipped below $27 US a barrel.

West Texas Intermediate crude closed at $26.55 US a barrel, down $1.90 or 6.7 per cent on the day. Western Canada Select crude had fallen to $14.50 US.

The falling price of oil helped drag the Dow Jones industrial average down by 1.5 per cent, while the TSX fell 1.3 per cent, after losses of 3 per cent at midday.

The Toronto Stock Exchange's S&P/TSX composite index dropped 159 points to 11,842, after bouncing off a loss of more than 400 points. On Tuesday, the index ended the session up 60.07 points — only the third positive day since the Christmas break.

The TSX is already in bear market territory, defined as 20 per cent below its high point, hit last year. Global stocks are approaching bear status, with the MSCI All-Country World Index down 20 per cent earlier in the day. 

In New York, the Dow had similar steep losses of more than 500 points but rose later in the day. It closed down 249 points to 15,766, and the broader S&P 500 index dropped 20 points to 1,860. The Nasdaq was off five points at 4,471.

The Canadian dollar has been on a wild ride since the Bank of Canada's announcement that it was leaving its key interest rate unchanged, but it ended the day on an upbeat note.

The loonie closed at 69.03 cents US, up .44 of a cent. It rose to 68.93 cents US after the 10 a.m. ET announcement, and then fell by one-third of a cent before recovering this afternoon.

The central bank said it was keeping the rate unchanged as inflation has remained within its ideal target range. The bank also reduced its 2016 economic growth projection to 1.4 per cent from its autumn forecast of two per cent.

There is increased concern about the U.S. Federal Reserve's decision to hike interest rates in the face of tepid global growth. And the high U.S. dollar is threatening the earnings of American companies while making everything more expensive for emerging economies.

A global rout of stock prices started overnight in Asia and spread to North America from the start of trading.

Part of the bad news is oil, but there are also doubts about China's economic health after its GDP growth for the last quarter dropped to 6.8 per cent, with many economists saying the real figures could be much lower.

The IMF's prediction Tuesday that global growth will slow and fear of further turmoil in China's markets weighed on the price of oil.

Adding to the trouble in the oil sector, Royal Dutch Shell announced its quarterly profit would fall by about 40 per cent.

Corporate earnings season is about to begin and there are fears that profits will disappoint throughout North America.

Overnight the Hong Kong and Japanese stock markets fell more than 3.7 per cent. European stocks followed and the Mexican peso and Russian ruble fell to record lows.

With files from The Canadian Press