The benchmark S&P/ASX200 index on Wednesday shed 17.7 points, or 0.22 per cent, to 8,213.3 while the broader All Ordinaries fell 15 points, or 0.18 per cent, to 8,456.8.
Capital.com analyst Kyle Rodda said that a downside surprise in US producer prices had done little to shake fears of persistent inflation in the United States ahead of the more closely watched consumer price data due Wednesday night.
Economists have tipped the readout to show annual US inflation at 3.3 per cent in December, with a number higher than that likely to spark further bearishness in the market, Mr Rodda said.
A downside surprise would be a massive relief, but the probability of that appears low, he added.
Expectations for US rate cuts have been drastically scaled back in recent weeks, with the market only giving a three per cent chance that the Fed will cut rates later in January and only roughly 50-50 odds it will cut by June.
Seven of the ASX's 11 sectors finished lower on Wednesday, with the property and consumer discretionary sectors slightly higher, and financials and materials basically flat.
Tech was the biggest mover, down 1.3 per cent.
Wisetech Global fell 3.7 per cent, Treasury One dropped 1.9 per cent and Infomedia retreated 5.1 per cent.
In the heavyweight mining sector, BHP lost 1.0 per cent to $39.78 and Rio Tinto dipped 0.1 per cent to $119.49, while Fortescue advanced 1.8 per cent to $18.84.
The big four banks were mixed, with ANZ adding 0.6 per cent to $29.19, NAB climbing 0.6 per cent to $37.40, Westpac rising 0.2 per cent to $31.86 but CBA dropping 0.5 per cent to $151.27.
Baby Bunting soared 13.9 per cent to a five-week high of $1.80 after the baby retailer reported same-store sales in the first half were up 2.2 per cent, with a higher profit margin.
"The November and December trading periods were particularly strong, with well-executed campaigns resonating with our consumers," chief executive Mark Teperson said.
The Australian dollar was buying 61.88 US cents, unchanged from close of business Tuesday.
ON THE ASX:
* The benchmark S&P/ASX200 index on Wednesday fell 17.7 points, or 0.22 per cent, to 8,213.3
* The broader All Ordinaries dropped 15 points, or 0.18 per cent, at 8,456.8.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 61.88 US cents, unchanged from Tuesday's ASX close
* 97.35 Japanese yen, from 97.55 yen
* 61.88 euro cents, from 60.38 euro cents
* 50.72 British pence, from 50.68 pence
* 110.50 NZ cents, from 110.32 NZ cents
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