The benchmark S&P/ASX200 index was 69.6 points, or 1.39 per cent, lower at 4932.9, while the broader All Ordinaries lost 69.3 points, or 1.36 per cent, to end at 5022.4.

It was the S&P/ASX 200's lowest close since August 15, 2006, when it closed at 4936.

At the close of day trading on the Sydney Futures Exchange, the September share price index contract was 70 points lower at 4961, on a volume of 29,099 contracts.

CMC Markets senior dealer Dominic Vaughan said it was the financial sector that had dragged the market down, a continuation of the theme out of the US.

''There are some major global issues out there with the financial sector and any sort of bad news tends to put it under pressure,'' Mr Vaughan said.

''We're coming into reporting season in the US and we have our labour force numbers out on Thursday, but all-in-all the sentiment still remains relatively negative at this point.''

The market got off to a poor start after a weak lead from Wall Street overnight, with the Dow Jones Industrial Average falling 56.58 points to close at 11,231.96.

Locally, ANZ fell 60c to close at $18.60, National Australia Bank shed 72c to end at $26.35, Westpac dropped 48c to $19.52 and Commonwealth Bank fell 72c to $40.73.

Asciano securities fell 65c, or 19.29 per cent, to $2.72.

The transport infrastructure company, Asciano Group, said it had no explanation for a fall in its share price of nearly 20 per cent.

''Asciano is not aware of any information concerning it which, if known, could be an explanation for recent trading in securities in Asciano,'' the ports and rail operator said in a statement to the Australian Stock Exchange yesterday.

Toll road operator Transurban Group gained 15c to close at $4.60 after the company reported an increase in annual revenue, helped by higher traffic volumes and toll increases.

The media sector was mixed, with Fairfax gaining 6c to end at $2.85, Consolidated Media Holdings up 2c to end at $3.19, News Corp losing 26c to close at $15.34 and its non-voting shares falling 25c to $15.08.

The retailers were also mixed, with Harvey Norman putting on 4c to end at $3.11, Woolworths gaining 37c to end at $24.40, David Jones shedding 11c to close at $2.91 and Wesfarmers losing 2c to close at $34.23.

The energy sector was weaker with Woodside falling $1.43 to $58.67, Santos falling 60c to $18.80 and Oil Search dropping 9c to $5.81.

The big miners were mixed, with Rio Tinto gaining 20c to $123.45 and BHP Billiton falling 25c to $39.50.

The spot price of gold was higher, closing Sydney trading at $US928.30 an ounce, up $US5 on Monday's local close of $US923.30 an ounce.

The gold miners were weaker, with Newcrest falling 68c to $27.64, Lihir dropping 4c to $3.02 and Newmont falling 8c to $5.08.

Cluff Resources was the most-traded stock on the market, with 69.3 million shares changing hands, worth $1.44 million. The resources company shed 0.1c to close at 2.1c.

Market turnover was 1.55billion shares worth $5.07 billion, with 357 stocks up, 824 down and 295 unchanged. The Australian bond market closed flat to firmer, with the front end rallying after a business confidence measure slumped to its lowest level since the September 2001 terrorist attacks.

At 1630pm, the yield on the Commonwealth Government March 2019 bond was 6.348, up from Monday's close of 6.343 per cent. The June 2011 bond was 6.590, down from 6.647 per cent.

On the Sydney Futures Exchange, the September 10-year bond futures contract was the same as Monday's close of 93.650. The September three-year contract was at 93.400, up from 93.335. AAP