Here's why the S&P/ASX 200 was slammed today

Fortescue Metals Group Limited (ASX:FMG), Westpac Banking Corp (ASX:WBC) and Insurance Australia Group Ltd (ASX:IAG) were amongst the heaviest hit as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) plunged 1.6%.

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The Australian sharemarket has been absolutely hammered today in what can only be described as a 'bloodbath'. The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has retreated a staggering 1.6% or 95 points to be trading at 5,853 points.

The decline can likely be attributed to a weak session for global equity markets overnight, together with a rampaging Australian dollar. The local currency surged above the US80c mark for the first time since January after US data revealed weak consumer confidence, with investors now expecting the US rate hike to be delayed.

At the same time, investors are also cooling on the idea of another official interest rate cut when the Reserve Bank meets next week, largely due to the strong recovery in commodity prices recently. Iron ore is trading just under US$60 a tonne, up from US$46.70 earlier in the month, according to the Metal Bulletin, while Brent crude is up around US$65 a barrel.

Even though the iron ore rally continued overnight, Australia's biggest miners are crumbling following a sharp run up over the last week and are acting as a heavy drag on the broader market. BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are down 1.1% and 1.5% respectively, while Fortescue Metals Group Limited (ASX: FMG) has been hammered 6.3%, with its shares now at $2.295.

The banks and insurance companies aren't helping the market's cause, either. Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB) have both fallen more than 2.2%, while Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ) are down 1.9% and 1.5% respectively.

The bearish performance by the insurance companies has likely stemmed from an update from Insurance Australia Group Ltd (ASX: IAG) regarding the recent New South Wales storms. The stock fell 4.1% after it was forced to downgrade its insurance margin guidance for the financial year, possibly leading investors to believe QBE Insurance Group Ltd (ASX: QBE) and Suncorp Group Ltd (ASX: SUN) may be forced to do the same. The pair dropped 1.2% and 2.4%, respectively.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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