The sharemarket looked like it was going to close higher this week, but then some hefty local profit downgrades, and concerns about Spain's economy, combined to pull it lower.
For the week, the benchmark S&P/ASX200 fell 4.4 points, to 4362.1, while the broader All Ordinaries index lost 11 points, or 0.2 per cent, to 4433.4.
The first half of the week was all about inflation, with the consumer price index increasing by just 0.1 per cent in the first three months of the year.
The result fell short of expectations, leading to expectations the Reserve Bank will cut the cash rate by 25 basis points next week, followed by a similarly sized cut the month after.
Fund managers said some stocks had benefited from the talk of interest rate cuts.
"I think the property sector, Telstra, and the banks have been well supported by expectations of lower interest rates lower cash rates suggest investors look elsewhere for higher yielding assets," a portfolio manager at SG Hiscock & Company, Rob Tucker, said.
"Telstra's had a good run the last three days after that inflation figure, which is seeing ongoing support for cash flow certainty."
Profit downgrades from JB Hi-Fi and Seven West Media came to dominate the business news cycle as the week wore on. JB shares fell to their lowest level in three years after the retailer forecast full-year earnings as much as 16 per cent below analyst estimates.
Analysts said "confession season" had come early this year.
"The deterioration for some domestically-exposed companies have been so material that they couldn't wait until the typical confession season to say that it's happening," an equity strategist at Bank of American Merrill Lynch, Josh Kirkwood, said.
The head of research at Australian Stock Report, Geoff Saffer, said encouraging leads from US markets were not enough to buoy the local market. "The market started positively but S&P's downgrade of Spain put a dampener on proceedings," he said. Standard & Poor's lowered Spain's long-term credit rating by two notches, saying the country's budget problems were likely to worsen as a result of the weak economy.
The utilities sector was up 0.6 per cent, while energy and mining stocks were weaker.
West Australian miner Atlas Iron was 1? higher at $2.88 after it announced plans to start three new mines in the Pilbara region.
BHP Billiton fell 21? to $35.89, and Rio Tinto fell 73? at $65.43.
In the retail sector, Harvey Norman fell 5? to $2.02, and Myer fell 7? to $2.32.
Macquarie Group was 84? higher at $29.27 despite full-year profit falling 24 per cent.
Telstra finished flat at $3.51 after it won an appeal in the Federal Court against an earlier ruling that allowed Optus customers to record and watch football matches on delay.
ALL ORDS AUSTRALIA