The sharemarket weakened after an early rise, as resources companies declined on uncertainty about China's growth outlook and Goldman Sachs downgraded the resources sector from overweight to neutral.
Further gains in high-yield and defensive sectors initially pushed the market up to a 4 1/2 year high following further gains on Wall Street.
At 11.45am AEDT, the benchmark S&P/ASX200 was down 0.2 per cent at 5137.6 after reaching 5163.5, its highest point since September 2008. The index is up 11 per cent this year, after a 15 per cent rise in 2012.
Recent signs of US economic recovery, combined with reassurances from the Federal Reserve about its quantitative easing strategy, prompted gains in high-yield and defensive stocks, with Commonwealth Bank of Australia up 1 per cent and Wesfarmers up 0.5 per cent.
Yet, resources stocks lost ground, with BHP Billiton, Rio Tinto and Fortescue Metals down 0.2 per cent to 1.7 per cent after China's retail sales and industrial production data undershot expectations at the weekend, while inflation rose.
"US markets continued on their liquidity-fuelled run-up as US 10-year bond yields head towards an 11-month high at 2.06 per cent," IG market strategist Evan Lucas said. The S&P500 rose 0.3 per cent overnight, led by financials and materials stocks.
"The market looks a little tired," RBS Morgans investment adviser Christopher Macdonald said.
"Cash has been pouring into high-yield and defensive stocks, but we are just starting to run out of puff in that regard. Normally that would spark a rotation to resources, but we are yet to see what's happening with China."
With China recently introducing curbs on property speculation, and its latest retail sales, industrial production and inflation data disappointing economists, Mr Macdonald said the market was awaiting any policy measures from the National People's Congress, which continues this week.
Goldman Sachs strategists Matthew Ross and Tim Toohey cited uncertainty about China's economic outlook, and doubts about the ability of resources companies to reduce costs, in their decision to downgrade the Australian resources sector from overweight to neutral.
Nevertheless, Goldman Sachs strategists raised their year-end target for the S&P/ASX200 to 5300 from a previous target of 5000. They upgraded their recommendation on banks from neutral to overweight, while downgrading their view on non-bank financials and healthcare stocks.
RBS Morgans' Mr Macdonald said the benchmark S&P/ASX200 could easily fall 100 points, but he expected it to be well supported above 5000.
"Recent history has shown those dips don't last long, so any sharp down day will reignite that volume drive into blue-chip yield," he said.
