THE sharemarket has shed $35 billion in the biggest one-day loss in nine months as the strong surge of 2013 came to an abrupt end.
The benchmark S&P/ASX 200 closed at the day's low, down 118.6 points, or 2.3 per cent, to 4980.1, while the broader All Ordinaries dropped 115.8 points, or 2.3 per cent, to 4998.6.
All sectors finished lower, contributing to the biggest selloff since May last year, with energy stocks slumping 4.6 per cent, materials sliding 3.4 per cent and financials falling 2.4 per cent.
"I'm not overly alarmed, this is probably a healthy break for the market after a strong run," said Mike Kendall, executive director of JBWere. "Pretty much everyone knows that things just won't go up in a straight line."
Another factor contributing to the selloff was comments from the US Federal Reserve, which, citing a risk of inflation, hinted at the winding back of its quantitative easing program.
Miners suffered heavy losses, with BHP falling 3.8 per cent to $37.17, Rio Tinto sliding 3 per cent to $67.30 and Fortescue Metals dropping 2.4 per cent to $4.80.
Mr Kendall said resource companies had been feeling the pressure of capital expenditure coupled with rising labour costs and investor expectations.
"I think a few investors are taking a view that the challenges in that part of the market are probably greater than what's being priced into a stock price," he said.
The financial sector, which had been responsible for a large part of the positive run this year, also felt the wrath of the pull-back. NAB dropped 3.7 per cent to $29.42, CBA fell 3.1 per cent to $64.81, Westpac slipped 2.8 per cent to $29.49 and ANZ lost 2.6 per cent to $27.98.
Origin Energy was one of the biggest losers of the day, down 8.5 per cent to $11.33, after the company's half-year net profit fell more than $200 million from the corresponding period.
Whitehaven Coal shares dived 6.1 per cent to $2.94 as managing director Tony Haggarty stepped down after rumoured difficulties in dealing with Nathan Tinkler since he became a major shareholder.
Qantas was one of the few that bucked the downward trend. The airline reported it had more than doubled its first-half net profit to $111 million. Its shares finished up 2.8 per cent to $1.66.
IAG shares jumped 2.8 per cent to $5.57 after the insurer reported a more than tripling of its first-half earnings to $461 million, citing as a major factor fewer natural disaster claims than in previous earnings.