At 12:00 (AEDT), the benchmark S&P/ASX200 index was down 26.3 points, or 0.54 per cent, at 4833.1 while the broader All Ordinaries had dropped 25.4 points, or 0.52 per cent, to 4834.3.
Of the top 50 stocks, 37 declined.
"The leads from offshore weren't particularly strong and we were probably due for a breather," RBS Morgans adviser Lisa Jarvis said.
"The key thing is, its had a good run."
Despite the day's fall, the ASX200 has still gained 8.5 per cent over the past two months.
Ms Jarvis said the banks in particular were pulling back slightly after a good run.
ANZ declined 15 cents to $23.70 ahead of its full-year earnings report on Thursday, and after chief executive Mike Smith said the bank would be reluctant to increase variable home loan rates till it really had to.
NAB, which reports full-year earnings on Wednesday, slipped three cents to $30.88 and Commonwealth Bank dropped 20 cents to $56.04. Investment bank Macquarie Group slipped 46 cents to $52.78 ahead of its first-half earnings report on Friday.
Westpac, which reports next week, bucked the trend and gained 14 cents to $27.44.
Among the miners, BHP Billiton declined 39 cents, or 0.97 per cent, at $39.81 and Rio Tinto was down 63 cents, or 0.93 per cent, at $66.87.
Ms Jarvis said the local market was rising with the dollar, which reached a 14-month high of 93.27 US cents on October 21.
"There's a lot of money leaving America and some of it is finding a home in the very top of our market and in bonds," she said. The dollar opened lower.
Stocks in the S&P/ASX 50 that led the market lower include real estate trust GPT Group, falling two cents, or 3.12 per cent, to 62 cents; News Corp (the parent company of the publisher of news.com.au), losing 36 cents, or 2.24 per cent, to $15.73; and gold miner Newcrest Mining, slumping 69 cents, or 1.95 per cent, to $34.78.
Stocks to buck the trend included Foster's Group, adding six cents, or 1.08 per cent, to $5.64; Tabcorp, rising six cents to $7.46; and Computershare, gaining six cents to $10.78.
The spot price of gold in Sydney was $US1,055.10, down $US8.17 on Friday's close of $US1063.27. Lihir Gold was down two cents to $3.21.
Wall Street fell significantly on Friday as investors locked in profits after a strong week of corporate earnings results, and as cautious forecasts from railway companies stirred unease about the economy.
The Dow Jones Industrial Average fell 1.08 per cent, the tech-heavy Nasdaq composite shed 0.5 per cent and the broad-market Standard & Poor's 500 index lost 1.22 per cent.
On the Sydney Futures Exchange, the December share price index contract was 17 points lower at 4835 on a volume of 10,720 contracts.
Shares open flat after Wall St lullFirst Horizon loss narrows
