The Australian sharemarket fell on Thursday, extending the sharpest one-day drop in two months as investors recalibrated their interest rate expectations.

After the market was spooked by the red-hot inflation report on Wednesday in Australia, US Federal Reserve Chairman Jerome Powell was unexpectedly cautious about the path of future rate cuts in America as the central bank delivered its second rate cut this year.

Property sector extends sell-off

That sentiment weighed on the local bourse, with the S&P/ASX 200 Index finishing down 40.7 points on Thursday, or 0.4 per cent, to 8885.5, with six of the 11 index sectors in the red. It dropped 1 per cent on Wednesday.

“The sell-off was sparked by the Fed’s hawkish cut,” said ETF Shares chief investment officer David Tuckwell. “Its cautious commentary dampened hopes for cuts in the future, causing longer-term bond yields to rise.”

With talk of further interest rate cuts off the table in Australia, the ASX’s rate-sensitive property sector extended its sell-off. Mirvac came off 3.8 per cent to $2.30, Dexus 4.3 per cent to $7.28, and Stockland Group 3.4 per cent to $6.25.

Consumer discretionary stocks were another drag, led by Wesfarmers, which fell 7.1 per cent to $86.13. Electronics retailer JB Hi-Fi dropped 4.5 per cent to $108.45, despite sales in its Australian division matching last year’s growth in the September quarter of 6 per cent.

Rate-sensitive tech stocks also fell, with Xero down 2.9 per cent to $146.42, WiseTech 2.6 per cent to $70.37, and Block 5 per cent to $115.27.

Meanwhile, lithium stocks soared after JPMorgan raised its spodumene price forecast and upgraded PLS to “overweight”. The shares rose 5.4 per cent to $3.30. Mineral Resources, which also beat earnings expectations, rocketed 13.7 per cent to $48.20. Liontown jumped 11.2 per cent to $1.15.

Stocks in focus

In company news, Coles fell 2.6 per cent to $22.11 as the September quarter update fell slightly short of expectations. The retailer reported a 3.9 per cent rise in group sales as supermarket revenue climbed 4.8 per cent to $9.97 billion.

That growth was better than the 2.1 per cent revealed on Wednesday by Woolworths, which rose 3.3 per cent to $28.53 on Thursday.

James Hardie fell 3.1 per cent to $32.83 after chairwoman Anne Lloyd was voted off the board along with two other directors, Rada Rodriguez and Peter-John Davis.

L1 Group jumped 11.7 per cent to $1.15 after completing a $286 million institutional placement and a $19 million sale of existing shares.

Ampol dropped 2.4 per cent to $30.33 despite posting a sharp increase in refining margins and stronger earnings in the September quarter.

And Appen fell 5.5 per cent to 78¢ after it reported ongoing US market volatility in the September quarter that limited revenue growth to 2 per cent.