At closing bell, the benchmark S&P/ASX200 dropped 118.20 points, or 1.65%, to 7,064.46. The broader All Ordinaries index dropped 123.30 points, or 1.66%, to 7,303.33.
The fall in Sydney equities came after the Dow Jones index logged its largest drop in almost two years following earnings results from major U.S. retailers Walmart Inc. and Target Corp. that were short of market expectations due to higher fuel and labor costs and issued back-to-back profit warnings, raising concerns over downside risks to growth.
Australia's unemployment rate for April hit its lowest since 1974, indicative of a tight labour market and strongly suggesting the Reserve Bank of Australia (RBA) will likely lift interest rates again in June to contain soaring inflation.
Financial stocks fell, with the so-called "Big Four" banks declining between 1% and 4.1%.
Tech stocks declined on following a sharp overnight drop on the Wall Street, with Block Inc, Wisetech Global, and NEXTDC falling 2.4%, 1.6% and 0.9%, respectively.
Woodside Petroleum declined 2.8% after its shareholders overwhelmingly approved the company's $41 billion merger with BHP Petroleum.
ECONOMIC NEWS: Australia's seasonally adjusted unemployment rate for April was at 3.9%, data from the Australian Bureau of Statistics showed Thursday.
CURRENCY NEWS: The Australian dollar was at $0.6981, against an earlier high of $0.7023.
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