US stocks logged their biggest drop in two weeks as investors assessed some disappointing earnings news.
Harman International, which makes audio systems for cars, and Yelp, an online listings company, were among the companies that fell sharply after posting weak earnings.
The stock market has sagged this week after climbing to record levels last Friday.
While many investors remain optimistic that growth will resume later in the year that belief is not yet being backed up stronger economic data or good corporate earnings reports.
A surge in the dollar in the first three months of the year is hurting company earnings for those that sell overseas, and a plunge in oil prices that lasted into January is hurting the energy sector.
“Until we see an improvement in earnings numbers ... investors are kind of caught,” said Gina Martin Adams, an equity strategist at Wells Fargo Securities.
The Standard & Poor’s 500 index dropped 21.34 points, or 1%, to 2,085.51 yesterday. That was the biggest drop since April 17.
The Dow Jones industrial average slipped 195.01 points, or 1.1%, to 17,840.52. The Nasdaq composite declined 82.22 points, or 1.6%, to 4,941.42.
Overall corporate earnings have come in better than analysts were expecting, but they are still much weaker than they were at the end of last year.
Companies in the S&P 500 are currently forecast to report average growth in earnings per share of just 0.6% for the first quarter, according to data from S&P Capital IQ. That compares with a growth rate of 7.8% in the fourth quarter of 2014.
Gains for stocks have slowed this year, as the market has entered the seventh year of a bull run.
After yesterday’s losses, the S&P 500 index was up just 1.3% for the year and the Dow just 0.1%.
The market is struggling to push higher as stock valuations have climbed. The price-earnings ratio, a measure of how much investors are willing to pay for every 1 dollar of earnings, is now just above 17. Three years ago it was 12.5.
“We’re treading water,” said Ron Sanchez, chief investment officer at Fiduciary Trust Company International.
While he still recommends owning US stocks, he says his expectations for returns are “much more modest” than at any time during the last three years.
Yelp was among the biggest losers yesterday.
The stock plunged 11.89 dollars, or 23%, to 38.39 dollars after it reported a loss of 1.3 million dollars in its first quarter and gave a lower-than-expected revenue outlook late on Wednesday.
Yelp said the number of visitors to its desktop site fell as more users browsed on smartphones and tablets.
Harman International also dropped after reporting earnings that fell short of analysts’ estimates and lowered its own forecast for revenue and earnings.
The company blamed the impact of the appreciating dollar and weaker growth. Its stock fell $9.82, or 7%, to 130.38 dollars.
Oil rose nearly 2% yesterday and finished April with a gain of more than 20%. US oil gained $1.05, or 1.8%, to $59.63 a barrel. Brent crude rose 94 cents to $66.78 a barrel.
Analysts say recent reports showing fewer rigs drilling for oil in the US and supplies levelling off are supporting higher prices.