At 10.15am (AEST), the benchmark S&P/ASX200 was down 103.5 points, or 2.17 per cent, at 4,657.6, while the broader All Ordinaries dropped 103.6 points points, or 2.17 per cent, to 4,670.5.
On the Sydney Futures Exchange, the December share price index futures contract fell 86 points to 4,689, on volume of 7433 contracts.
In the financial sector, Commonwealth Bank was down 34 cents to $45.06, ANZ Banking Group lost 44 cents to $18.54 and National Australia Bank fell 55 cents, or 2.14 per cent, to $25.15.
Westpac lost four cents to $23.47 and its takeover target St George Bank dropped 17 cents to $30.65.
Among the miners, BHP Billiton lost $1.62, or 5.12 per cent, to $30.05, while takeover target Rio Tinto shed $5.04, or 5.52 per cent, to $86.21.
In the US overnight, the Dow plummeted 348.22 points, or 3.22 per cent, to 10,482.85, while the broader S&P500 fell 46.78 points, or 4.03 per cent, to 1,114.28.
The NASDAQ, which carries tech and more recently listed heavyweights, lost 92.68 points, or 4.48 per cent, to 1,976.72.
CMC Markets senior dealer Dominic Vaughan said the market was still very nervous.
"The resources are down as metal prices fell heavily overnight, BHP and RIO got absolutely hammered," Mr Vaughan said.
"The financial are also under stress and even if the package goes through there are other major issues the market has to face."
In news today, the operator of the Australian Securities Exchange, ASX, called for an indefinite ban on "naked" short selling, as part of a series of recommendations aimed at making the technique more transparent.
Home builder Stockland Group revised its guidance for fiscal 2009 following a write down of its assets in the United Kingdom and its stock fell 25 cents, or 4.31 per cent, to $5.55.
The local energy sector was weaker this morning, with Woodside Petroleum down $1.61, or 3.24 per cent, at $49.81, Santos dropped 74 cents, or 3.98 per cent, to $17.83 and Oil Search shed 22 cents, or 3.70 per cent, to $5.59.
At 10.35am (AEST), spot gold was trading in Sydney at $US831.75 an ounce, down $US39.15 on yesterday's close of $US870.90..
The local gold sector fell heavily.
Newcrest Mining was down $1.85, or 6.41 per cent, at $27, Newmont Mining had fallen 41 cents, or 8.4 per cent, to $4.47, while Lihir Gold was 18 cents lower, or 6.5 per cent, at $2.59.
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