The benchmark S&P/ASX200 index on Tuesday finished down 60.2 points, or 0.74 per cent, to 8,208.9, snapping its three-day winning streak.
The broader All Ordinaries dropped 565 points, or 0.66 per cent, to 8,481.9.
Overnight, Mr Powell told a conference of business economists the US economy was "strong overall" and interest rate cuts would come "over time".
"This is not a committee that feels like it's in a hurry to cut rates quickly," Mr Powell said in response to a question, hosing down speculation the Fed would do just that.
Closer to home, the Australian Bureau of Statistics reported on Tuesday that retail sales ticked up a solid 0.7 per cent in August, although the bureau attributed the increase to the month being much warmer than usual.
IG market analyst Tony Sycamore said with Chinese markets closed Monday for a national holiday, Australian traders had moved to the sidelines, waiting more clarity on the Chinese stimulus measures whose announcement last Tuesday had led to last week's rally.
CMC Markets head of sales trading Ashley Glover said while the ASX200 finished lower on the day, the index also still looked technically bullish and a move to 8,400 was in traders' sights.
Four of the ASX's 11 sectors finished lower and six ended higher, with materials/mining the biggest loser, dropping 2.3 per cent after five days of gains.
BHP dropped 2.9 per cent to $44.64, Fortescue 3.5 per cent to $19.96 and Rio Tinto 2.6 per cent to $125.74.
Goldminers Newmont, Evolution and Northern Star dropped 0.9, 1.5 and 0.5 per cent, respectively.
All big four banks were lower, with CBA down 1.5 per cent to $133.34, Westpac retreating 1.7 per cent to $31.19, ANZ drooping 1.1 per cent to $30.15 and NAB 0.6 per cent to $37.13.
REA Group rose 4.9 per cent to a one-month high of $210.80 after the realestate.com.au owner walked away from its potential $12 billion acquisition of UK-based property platform Rightmove.
"We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available," REA chief executive Owen Wilson said.
"They had nothing to lose by engaging with us."
Sigma Health soared 22.6 per cent to a 17-year high $1.765 after the Australian Competition and Consumer Commission said it was considering concessions by the pharmacy product supplier to get its proposed reverse takeover of Chemist Warehouse past the line.
Sigma is offering to let hundreds of its franchised pharmacies - operating under brands such as Amcal, Discount Drug Stores and Guardian - quit the group without penalty to alleviate anti-competition concerns previously outlined by the ACCC, which notes that the merged entity would be both a wholesale supplier and a competitor to these pharmacies.
Appen rose 9.7 per cent to a 15-month high of $2.15 as the artificial intelligence dataset company continued its rebound amid enthusiasm for all things AI.
Appen shares have been on a rocket ship, climbing roughly fivefold in the past two months.
Collins Foods finished 0.2 per cent lower at $8.72. After the market closed, the fast food operator named Austrade boss Xavier Simonet as its new managing director and chief executive, starting next month.
The Australian dollar was buying 69.28 US cents, from 69.33 US cents at Monday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Tuesday down 60.9 points, or 0.74 per cent, at 8,208.9
* The All Ordinaries dropped 56.5 points, or 0.66 per cent, at 8,481.9
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 69.28 US cents, up from 69.33 US cents at Friday's ASX close
* 100.01 Japanese yen, from 94.46 Japanese yen
* 62.21 euro cents, from 62.11 euro cents
* 51.78 British pence, from 51.78 pence
* 109.41 NZ cents, from 108.91 NZ cents.
