Australian shares rallied on Tuesday afternoon but still gave up all of Monday’s gains after a terrible start to the trading session.

The S&P/ASX 200 Index fell 68 points, or 1.2 per cent, to 5589 points.

The benchmark All Ordinaries Index declined 1.3 per cent to 5661.

The market’s march lower was fuelled by further declines by the big banks, which have seen their shares rocked by a plethora of bad news from the banking royal commission in recent weeks.

NAB shares dropped to $23.13 and Westpac hit $24.31 – both six-year lows.

ANZ was at a two-year low of $23.69 while Commonwealth bank dropped to $68.60.

The only clear winners were some advances by the miners. Northern Star Resources was up 3.2 per cent at $8.56.

Market heavyweight Telstra also rose 0.3 per cent to $2.91.

Caltex shares were among the worst performers, dropping 5.4 per cent to a new four-year low after it released a bleak earnings outlook.

The drop followed a volatile session on Wall Street overnight as US shares continued to descend into major correction territory.

The Dow Jones Industrial Index shed 508 points and the benchmark S&P 500 Index fell to a 14-month low.