At 4.18pm (AEDT) the benchmark S&P/ASX200 index was down 42.7 points or 1.17 per cent at 3598, while the broader All Ordinaries had fallen 39.1 points or 1.09 per cent to 3534.2.
Burrell Stockbroking associate Peter Wright said the market was particularly hard to gauge with low trading volumes.
"I'm very surprised we are down to the level that we are,'' Mr Wright said.
"I wouldn't read too much into it, I wouldn't be surprised if there is a fair proportion of short-selling and anticipatory selling looking at potential capital issue.''
Resource stocks were a mixed bag.
Rio Tinto shares gained 6.95 per cent to $40.00 after it announced plans to slash jobs, cut spending and costs and sell assets in order to survive the global economic crisis.
BHP Billiton lost 16 cents to $30.20
"It wouldn't suprise me too if there's an element of profit taking in some of this stuff,'' Mr Wright said of the major miners.
"A lot of people bought BHP under $25, and Rio around $30, and there are opportunities in this market for some short-term trading.''
Financials were also mixed.
Commonwealth Bank dropped 35 cents to $28.15, NAB fell 25 cents to $19.35 and ANZ rose 27 cents to $14.42.
Westpac told shareholders its balance sheet growth is set to slow over the coming year, with impairment charges rising as the economy slows.
Westpac shares rose 18 cents to $16.55.
Bank of Queensland indicated it is to consider growth options including takeovers and alliances as it aims to take the place vacated in the market by St George and BankWest.
Its shares lost 2 cents to $10.25.
Making news, media mogul Kerry Stokes has been elected chairman of West Australian Newspapers, while businessmen Don Voelte and Sam Walsh joined the board as independent directors.
WAN shares lost 4.41 per cent, to $4.55.
Fairfax shares gained 1.5 cents to $1.52 as the market reacted to its decision to cut its dividend payout ratio to 20 per cent from 80 per cent in the first half of fiscal 2009.
Mining services provider Boart Longyear said it would cut 67 jobs in Adelaide as it continued its restructuring and consolidation of manufacturing in the Asia-Pacific Region.
Boart Longyear stocks added 1 cent to 24.5 cents.
Qantas has been fined $20 million for price fixing in the airfreight market.
Qantas dropped 4 cents to $2.35 while rival Virgin Blue was flat at 28 cents.
At 4.30pm the price of gold in Sydney was $US806.35 per fine ounce up $US27.50 on Wednesday's close of $US778.85.
Gold stocks were mixed, with Lihir gaining 9 cents to $2.35, Newmont adding 21 cents to $5.21 and Newcrest dropping $1.28 to $27.31.
In energy Woodside dropped 93 cents to $32.77, Oil Search lost 6 cents to $4.70 and Santos added 90 cents to $14.80.
Retailers were down right across the sector, with all the major players posting losses
Coles owner Wesfarmers was down 58 cents to $15.77, Woolworths dropped 89 cents to $26.19 and David Jones was 11 cents weaker at $2.90.
On the Sydney Futures Exchange the December share price index contract was down 34 points at 3587 on a volume of 26,597 contracts.
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