The benchmark S&P/ASX200 index on Wednesday dropped 39.4 points, or 0.47 per cent, to a 20-day low of 8,353.6, while the broader All Ordinaries dropped 39.6 points, or 0.46 per cent, to 8,610.4.
Capital.com analyst Kyle Rodda said markets were trading cautiously ahead of a US consumer price readout due on Wednesday night that could decide whether equities enjoy a year-end rally or a period of volatility.
"The inflation data will either provide the Fed the green light to cut rates next week, or cast a cut into doubt," Mr Rodda wrote.
IG market analyst Tony Sycamore said if the ASX200 made a sustained break below 8350-ish, that would trigger what's known as a head-and-shoulders topping pattern, projecting a further fall to 8250 before 8200.
Otherwise, Mr Sycamore expects more of the two-step forward, one-step backward price action the ASX saw before September.
The tech sector was the ASX's biggest mover on Wednesday, dropping 1.4 per cent as Wisetech Global fell 3.0 per cent and Xero dropped 1.4 per cent.
The big four banks were all lower, with ANZ falling 1.3 per cent to $29.09, Westpac dropping 0.4 per cent to $32.12 and NAB and CBA both creeping 0.1 per cent lower, to $37.59 and $157.52, respectively.
In the heavyweight mining sector, Fortescue fell 1.7 per cent to $20.10, and Rio Tinto subtracted 1.2 per cent to $123.81, while BHP added 0.4 per cent to $42.
South32 suffered its biggest loss since August, dropping 4.4 per cent to $3.52, as the bourse's fifth-biggest miner withdrew production guidance for Mozal Aluminium because of civil unrest in Mozambique following a disputed election in November.
The transport of raw materials to the smelter has been impacted by road blockades, South32 said, adding that it has implemented contingency plans.
"The safety and wellbeing of our people at Mozal Aluminium is our priority," it said. "Our workforce is safe and there have been no security incidents at Mozal Aluminium."
In the industrial sector, Silex Systems grew 8.6 per cent to $6.09 after the exclusive licensee of its laser-based uranium enrichment technology was one of six awardees of a potentially billion-dollar contract by the US Department of Energy.
In small caps, Nexted Group soared 47.8 per cent to a three-month high of 17 cents after the tertiary education provider acquired the right to re-enrol 1,800 English language and vocational students from International House after its competitor entered external administration last month.
In currency, the Australian dollar was buying 63.72 US cents, from 63.98 US cents at Tuesday's ASX close.
The Aussie was also under 50 British pence for the first time since the start of the COVID-19 pandemic, March-April of 2020.
ON THE ASX:
* The benchmark S&P/ASX200 index on Wednesday fell 39.4 points, or 0.47 per cent, at 8,353.6
* The broader All Ordinaries dropped 39.6 points, or 0.46 per cent, to 8,610.4.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 63.72 US cents, from 63.98 US cents at Tuesday's ASX close
* 96.63 Japanese yen, from 96.62 Japanese yen
* 60.54 euro cents, from 60.58 euro cents
* 49.91 British pence, from 50.16 pence
* 110.01 NZ cents, from 109.67 NZ cents
