Wall Street fell for a second day on Thursday as earnings failed to live up to lofty expectations and investors booked profits in a market extended by weeks of gains.
Sectors that led the recent rally such as materials and technology were among the worst hit. The S&P materials index <.GSPM> slid 1.7 percent and the Philadelphia semiconductor index <.SOX> lost 1.5 percent.
Shares of Freeport McMoran Copper and Gold
On Wednesday, U.S. stocks suffered their worst decline in two months as analysts said the market is entering a corrective phase that could drag equities lower in the weeks ahead.
Earnings expectations have been very high and the market has not been able to see enough positive news to keep prices at these high levels, said Nick Kalivas, an analyst at MF Global in Chicago.
Underscoring how overbought the market has become in recent weeks, stocks failed to react to positive jobs and housing market data that pointed to a strengthening recovery.
The Dow Jones industrial average <.DJI> dropped 18.99 points, or 0.16 percent, to 11,806.30. The Standard & Poor's 500 Index <.SPX> fell 3.76 points, or 0.29 percent, to 1,278.16. The Nasdaq Composite Index <.IXIC> lost 24.32 or 0.89 percent, to 2,701.04.
Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco, said the market was at the start of a correction that would drag prices lower through February.
I do consider it to be the start of a something more, he said. We're looking for a 5 percent to 7 percent pullback range, and I think we started it yesterday.
Natural resources stocks came under pressure after data showing high growth in China stoked fears the country may need to tighten credit in order to check inflation.
U.S. crude oil futures fell 2.4 percent to $88.66 a barrel, while copper slid to its lowest level in a month.
In other earnings news that pointed to the market's elevated expectations, Parker Hannifin Corp
In the latest economic data, U.S. existing home sales jumped more than expected in December despite bad weather as the housing sector struggled to recover from a severe slump.
In another report, U.S. initial jobless claims posted their biggest weekly decline in nearly a year.
(Reporting by Edward Krudy; Editing by Jan Paschal)