Yesterday marked a black day for the Australian sharemarket.
There was no escaping the carnage that hit the boards as the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) endured its worst single-day performance since early 2013, sliding 134.3 points or 2.3% to finish the session at 5,692.2 points.
As reported by the Fairfax press, nearly $40 billion was wiped from the market's overall value as investors responded to weak quarterly results from Woolworths Limited (ASX: WOW) and Commonwealth Bank of Australia (ASX: CBA).
Woolworths slipped 5% after it reported a 1.6% decline in overall sales during the three-month period ended 31 March, 2015, while its Food and Liquor division significantly underperformed that of its primary rival Coles, owned by Wesfarmers Ltd (ASX: WES).
Commonwealth Bank did even worse. Roughly $8 billion was wiped from the bank's market value as it ended the session 5.9% lower at just $82.98 after it reported a decline in net profit, compared to the prior corresponding period. Its result rubbed off on Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) which all suffered painful declines, as well.
Earnings reports that didn't stack up to the market's high expectations as an aside, another key factor that is dragging investor confidence under right now is the prospect of no more official interest rate cuts.
The market crumbled after the RBA indicated the rate cutting cycle had come to an end on Tuesday, even though it cut rates to a record low 2%. Investors are selling out of the nation's high-yield dividend stocks in retaliation, recognising that many are now trading at outlandish premiums.
As it stands, each of the Big Four banks have fallen into a "technical correction", having lost more than 10% from their peak share prices, while the ASX 200 is down almost 5% in less than a fortnight.
While these sharp pullbacks can present investors with fantastic buying opportunities (as an example, see my colleague Tim McArthur's recent article on Woolworths), investors also need to ensure they are prepared in case market conditions do continue to worsen.
