The Toronto stock market closed down more than 240 points Tuesday as commodities sold off after a long run-up in prices.

The election of the Conservatives as a majority government did little to cushion the fall.

The S&P/TSX composite index fell 242.14 points or 1.74 per cent to 13,692.37.

The Dow Jones industrial average lost 0.15 of a point to 12,807.51. The Nasdaq composite index fell 22.46 points to 2,841.62 while the S&P 500 index was off 4.6 points to 1,356.62.

The Canadian dollar closed down 0.19 of a cent to 104.98 cents US.

June crude oil on the New York Mercantile Exchange fell $2.47, or 2.2 per cent, to $111.05 US a barrel, a day after it reached its highest intraday price since September 2008.

Three-month chart for the S&P/TSX composite index. (CBC)

Crude has jumped about 34 per cent since mid-February, a rally fuelled by disruption of oil supplies in Libya and a weaker dollar.

June gold on the Nymex declined $16.70 from Monday's latest record close to $1,540.40 US an ounce.

Silver prices also continued to retreat with the July contract down $3.50 to $42.59 US an ounce. The metal has been sliding for the past week after CME Group Inc., which owns Comex, tightened restrictions on how much of a trade can be done on credit.

"The Mideast is in turmoil, the U.S. is in turmoil and probably will continue to be as it figures out it has a long term economic problem. And you have the European debt crisis," said John O'Connell, chief executive of Davis Rea Ltd.

He added that investors are looking for a reason to take the market higher as a successful first-quarter earnings reporting period starts to wind down.

"Revenue growth has been reasonably anemic but profit growth has been good," said O'Connell.

"The good earnings and the good numbers are over. The stock market has rallied on earnings news."

Majority government seen as market friendly

Most economists saw the Conservative victory as comforting for markets.

"From the perspective of the market and investors, a Conservative-led government represented the most benign scenario," TD Bank wrote in a note by its economics department.

"The commitment to prudent fiscal management will be favourably received by markets and investors."

The Conservatives won 167 seats, while the NDP will form the official Opposition with 102. The Liberals were reduced to 34 seats, while the Bloc Québécois is left with only four.

"Financial markets don't like uncertainty … with the Conservatives securing a majority, the political scene is still one with Stephen Harper as prime minister," Paul Ferley, assistant chief economist at RBC in Toronto said.

"I think markets have got a sense of what their policy agenda is, so as a result there is a diminution in terms of that uncertainty. This results in a positive tone just in the sense that the uncertainty has been lessened."

Ferley said the dollar and stock markets should react positively to the majority government, which would give it a "greater scope" to push policy and plan over the long term.

Economists still see the loonie reacting favourably to the election news.

Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, said the dollar should remain strong, as the Conservative platform is "viewed as more business friendly on the international stage."

Sutton said the expectation of a corporate tax rate lower than the U.S. rate, as well as the government's stance on the oilsands will likely be seen as a positive.

"This is probably the best-case scenario for the Canadian dollar because not only does it bring an end to the uncertainty over the election, but it also brings longer-term stability to the political scene in Canada."