New York ? An unexpected rise in jobless claims unnerved Wall Street on Thursday, sending stocks sharply lower on worries the market’s recent rally might have come too far, too fast. Yahoo earnings which met, but didn’t beat, estimates also disappointed investors.

“Yahoo didn’t deliver significant upside and it’s a huge momentum name, so you have some momentum taken out of the market,” said Keith Keenan, vice president of institutional trading at Wall Street Access, a New York-based brokerage firm. “The bulls anticipated much higher numbers.”

The Dow closed down 120.17, or 1.3 percent, at 9,036.04, having lost 66 points Wednesday. It was the sharpest point drop since June 23, when the blue chips closed 127.80 points lower. The broader market also declined.

Yahoo slid $2.73, or 7.7 percent, to $32.56 after the Internet company reported quarterly profit doubled. The result was in line with forecasts, but First Albany lowered the company’s stock rating to “neutral” from “buy,” citing in part possible overvaluation.

Stocks have surged in recent months as investors grow increasingly upbeat about a solid economic recovery by year’s end. But analysts say investors now want to see more concrete evidence of improvement, particularly in the tech sector, which has seen particularly strong gains.

Still, analysts described Thursday’s declines as more of a natural pullback.