By 10.15am (AEDT), the benchmark S&P/ASX200 index was down 24.5 points, or 0.71 per cent, at 3,424.4 while the broader All Ordinaries index lost 21.8 points, or 0.64 per cent, to 3376.2.
On the Sydney Futures Exchange, the March share price index futures contract shed nine points to 3,391 on a volume of 4,222 contracts.
The banking sector was mixed.
National Australia Bank lost 21 cents to $18.19, Commonwealth Bank lost 43 cents to $29.42, Westpac fell 19 cent to $16.81, and the ANZ lost ten cents to $12.50.
In the resources sector, market giant BHP Billiton added three cents to $30.19 while rival Rio Tinto lost 51 cents to $51.27.
In New York, Wall Street teetered near its lowest levels in three months, helped along by news that Hewlett-Packard was scaling back its 2009 forecast.
Hewlett-Packard fell 8 per cent after the computer and printer company turned in disappointing fourth-quarter sales, hurt by tightening spending at many businesses.
When markets settled, the Dow Jones industrial average was down 89.68 points, or by 1.19 per cent, to 7465.95.
The Standard & Poor's 500 index fell 9.48, or 1.2 per cent, to settle at 778.94. The technology-heavy Nasdaq composite index settled down 25.15, or 1.71 per cent, to 1442.82.
ABN AMRO Morgans senior client adviser Bill Bishop said the banks were leading the market lower.
"Because the markets around the world are lower of late, they're making a comment about the effectiveness of America's bailout package," he said.
"Like it or lump it, we trade off America, and they're sending out mixed messages. It's frightened the markets."
By 10.27am (AEDT), Santos had added 24 cents to $14.65, Woodside had found 71 cents to $34.23 and Oil Search found 15 cents to $4.79.
In media stocks, Fairfax lost 4.5 cents to 94 cents, after hitting a record intraday low of 93 cents shortly after trading opened, News Corp lost three cents to $10.47, News's non-vioting scrip lost eight cents to $9.43, and the Ten Network was holding steady at 80 cents.
The Seven Network added five cents to $5.75.
Among the major retailers, Woolworths lost one cent to $27.49, David Jones held steady at $2.41 and Coles owner Wesfarmers shed eight cents to $17.01.
Telstra was holding at $3.68, while Optus owner Singtel lost four cents to $2.49.
Property developer Westfield Group added two cents to $10, Macquarie Group lost $1.21, or 5.53 per cent, to $20.68 and Lend Lease was down nine cents, to $5.20.
The national Airline, Qantas, lost one cent to $1.74.
Shares flat on mixed company news
Market higher at noon
Large banks take beating on Wall Street
