The benchmark S&P/ASX200 index on Friday dropped 118.9 points, or 1.36 per cent, to 8,634.5, while the broader All Ordinaries fell 127.5 points, or 1.41 per cent, to 8,9087.
It was the fourth day of declines in a row for the ASX200, as well as its third straight week of losses.
It dropped 1.54 per cent for the week, its worst weekly performance since a 3.9 per cent loss for the first week of April.
AMP chief economist Shane Oliver said hawkish comments by Federal Reserve officials overnight had dialled back expectations that the Fed would cut rates in December.
Interest rate markets are pricing in just 50/50 odds of a December 10 rate cut, down from a 95 per cent implied probability a month ago, according to CME FedWatch.
Markets also reacted to an unwinding of the AI trade, which was losing momentum amid concerns valuations were too rich, Capital.com analyst Kyle Rodda said.
Nine of the ASX's 11 sectors finished lower, with energy and consumer staples up marginally.
The tech sector was by far the biggest loser, losing 4.4 per cent in its worst day in seven months.
Megaport fell 9.6 pre cent, Hub 24 retreated 8.0 per cent and Life360 fell 6.7 per cent, taking its losses for the week to more than 20 per cent.
The big four banks finished deep in the red, with CBA dropping 1.8 per cent to a seven-month low of $157.30, ANZ falling 2.6 per cent to $35.99, Westpac subtracting 1.6 per cent to $38.81, and NAB losing 1.7 per cent to $41.48.
Commonwealth Bank shares are down 18 per cent from their record high of $192 in June, leaving them up just 2.6 per cent for 2025.
The heavyweight mining sector also lost ground, with BHP falling 1.3 per cent to $42.75, Fortescue dropping 1.0 per cent to $20.23, and Rio Tinto subtracting 1.4 per cent to $13.85.
Goldminers did not do any better even as the precious metal changed hands for about $US4,196 an ounce, up slightly from Thursday.
Northern Star dropped 1.9 per cent, Evolution retreated 2.4 per cent and Westgold fell 4.9 per cent.
A handful of names finished in the green, including lithium miners Pilbara and Liontown, which climbed 1.1 and 1.0 per cent, respectively, and Santos, which added 1.2 per cent.
The ASX200 has fallen more than five per cent in the three-and-a-half weeks since it hit a record high of 9,094 on October 21.
It is still up 5.8 per cent since the start of 2025, but down 2.4 per cent this quarter.
The Australian dollar was buying 65.37 US cents, from 65.57 US cents at 5pm on Thursday.
Cryptocurrencies were also struggling, with bitcoin falling below $US99,000 for the first time since April.
Close to 5pm AEDT, the original cryptocurrency was changing hands for $US97,300 ($A148,800), down 4.7 per cent in the past 24 hours.
ON THE ASX:
* The S&P/ASX200 lost 118.9 points, or 1.36 per cent, to 8,634.5
* The broader All Ordinaries fell 127.5 points, or 1.41 per cent, to 8,907
CURRENCY SNAPSHOT:
One Australian dollar trades for:
* 65.37 US cents, from 65.57 US cents at 5pm on Wednesday
* 100.88 Japanese yen, from 101.59 Japanese yen
* 56.11 euro cents, from 56.61 euro cents
* 49.69 British pence, from 49.99 British pence
* 115.04 NZ cents, from 116.12 NZ cents
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