Close Australian shares gave up almost half of last week's record gains after miners dived and the Reserve Bank's latest rate cut failed to lure back investors.
The benchmark S&P/ASX200 index closed at is low for the day, losing 4.2%, or 153 points, at 3528.2, while the All Ordinaries index was down 4%, or 145.6 points, at 3473.4.
The indices hit the skids from the opening after another steep dive on Wall Street on news that the US economy is officially in a recession - and has been for almost a year.
"We're back down to 3500, which is a pretty substantial support level,'' said Freeman Fox director Peter Spann. "Tomorrow will be a more interesting day than today.''
Mr Spann noted that before the run-up in stock prices, the market traded between 2800 and 3400 for almost five years.
"If we hold here at 3500, it's a reasonable support.''
On the currency markets, the Australian dollar rose after the RBA announcement, recently trading at 63.98 US cents, 59.80 yen and 50.59 euro cents.
Asian markets were also lower in afternoon trading. The Nikkei 225 was down 4.9%, or 412.13 points, at 7985.09, and the Hang Seng was also down 4.9%, or 696.88, at 13,411.96.
However, Dow futures were pointing higher - up 0.6%, or 51 points, at 8190.
Broad-based falls
Apart from telecoms, all sectors of the market were lower, with the materials sub-index falling the most. By the close, it had lost 7.2% for the day, energy shares were 4.7% down and financials sank 4.3%.
Among major stocks, BHP Billiton ended the day $2.87, or 9.6%, lower at $27.03, while Rio Tinto was off $3.70, or 8.7%, at $39.00.
Fortescue Metals shares had a roller-coaster day, first falling then rising before ending the day unchanged at $2.50.
In the energy sector, Woodside Petroleum was down $3.79, or 10.5%, at $32.41 and Santos was down 39 cents, or 2.7%, at $14.00 after crude oil fell below $US50.
The gold miners fell after the price of the metal fell, down 2.2% to recently trade at $US773.32.
Lihir Gold rose 2 cents, or 0.9%, to $2.30 and Newcrest fell 8 cents, or 0.3%, to $25.76.
GDP fears
"I don't think the GDP is going to be good news.
"We're now just starting to see and will continue to see some of the shakeout. And I think these numbers around the world are going to get worse before they get better.
"It's just a matter of how much of this bad news the market has priced in.''
Banks down
The banks added to yesterday's losses during the day and fell even further after the rates announcement. At the close, ANZ was down 43 cents, or 3%, at $13.95 and the Commonwealth Bank lost $1.75, or 5.3%, to $31.25.
NAB was down 71 cents, or 3.6%, at $18.72 and Westpac was down 84 cents, or 5%, at $16.10.
Investment bank Macquarie Group was down $3.91, or 13%, at $26.21.
Suncorp Metway was down 34 cents, or 4.3%, at $7.51 after earlier trading higher, while QBE Insurance was unchanged at $23.94 after trading as low as $23.00 this morning.
Retailers lower
The retailers were mixed, with Woolworths falling 40 cents, or 1.5%, to $26.90 and Wesfarmers down $1.04, or 5.5%, at $17.90.
Harvey Norman reported this morning that sales for the four weeks to November 30 rose by 0.5%, from the same period last year. The outcome for written sales follows a 3.1% fall in the 28 days ended November 23.
Harvey Norman lost 2 cents, or 0.9%, to $2.13, while David Jones was up 13 cents, or 5.1%, at $2.70.
Shopping centre operator Westfield was down 76 cents, or 5.1%, at $14.24.
Media, telcos
Among media stocks, News Corp was down 33 cents, or 2.7%, at $11.77 and Fairfax was down 4.5 cents, or 3.2%, at $1.38.
The telcos fared a bit better, with the sector up 1.9%. Telstra was the biggest gainer on the index, rising 9 cents, or 2.2%, to $4.14, while SingTel, owner of Optus, fell 2 cents, or 0.8%, to $2.51.
The airlines were also lower. Qantas lost 10 cents, or 4.3%, to $2.25 and Virgin Blue was unchanged at 31 cents.
On a positive note, Ramsay Health Care was higher - up 12 cents, or 1.3%, at $9.01, as was Platinum Asset Management, which rose 4 cents, or 1.3%, to $3.20.
Other big risers were Metcash, which was up 21 cents, or 5.2%, to $4.21 and Origin Energy, which gained 33 cents, or 2.1%, to $15.98.
czappone@fairfax.com.au
BusinessDay with AAP
