* Materials, energy stocks weigh as oil drops 2.4 pct
* Earnings fail to meet lofty hopes
* Dow off 0.2 pct, S&P off 0.3 pct, Nasdaq off 0.9 pct (Updates to midday)
By Edward Krudy
NEW YORK, Jan 20 (Reuters) - 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 slid 1.7 percent and the Philadelphia semiconductor index lost 1.5 percent.
Shares of Freeport McMoran Copper and Gold fell more than 4 percent after it cut its sales forecast and said costs would rise, while F5 Networks tumbled 22 percent after it forecast weak second quarter revenue.
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 dropped 18.99 points, or 0.16 percent, to 11,806.30. The Standard & Poor's 500 Index fell 3.76 points, or 0.29 percent, to 1,278.16. The Nasdaq Composite Index 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.
Alcoa Inc was the Dow's biggest percentage decliner, falling 1.6 percent to $15.80, while Exxon Mobil Corp shed 1.2 percent to $77.33.
In other earnings news that pointed to the market's elevated expectations, Parker Hannifin Corp fell 5.1 percent to $86.47 despite beating earnings forecasts as investors faulted the size of the beat. The company makes industrial control systems.
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)