The All Ordinaries Index lost 89 points to 5,665 and the ASX 200 fell 98 points to 5,619.
The banking sector took the biggest hit with the Commonwealth Bank down 5.2 percent at $43.47 while the National Australia Bank and St. George fared only marginally better, losing 4.9 percent.
Shares in the supermarket giant Woolworth's shed 4.2 percent and closed at $26.15.
Market analysts said investors feared a bumpy ride in the coming months because of the uncertainty over the U.S. economy.
The Australia dollar, however, firmed slightly -- buying 88.9 U.S. cents, 94.82 Japanese yen, 44.62 British pence and 60.13 euro cents.
West Texas crude oil fetched $91.66 a barrel and spot gold was trading at $921.70 an ounce.
Notable deaths of 2014 [PHOTOS]