The S&P 500 was on track to post its worst day in about two months on Wednesday as disappointing results from Goldman Sachs and Wells Fargo deflated hopes for strong bank earnings.

The Nasdaq fell more than 1 percent, also its biggest daily percentage loss since Nov 23, as more disappointment on the earnings front came from Cree Inc . Its stock tumbled 14.1 percent to $53.87.

A semiconductor index <.SOX> also dropped 2 percent, its worst percentage decline since Aug 30.

Goldman Sachs Group Inc's stock fell 3 percent to $169.48 after the Wall Street firm posted a 53 percent drop in profit as trading revenue tumbled. Shares of Wells Fargo & Co lost 2.1 percent to $31.78 after the company posted a fourth-quarter profit that missed some analysts' estimates.

With financials, I think expectations were for some better results after a fairly robust fourth quarter and start to 2011, said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

Villalta said he was still bullish on financials for 2011, however, noting the sector's recent gains. Financials have been among market leaders in the recent rally, with the S&P 500 up 12.7 percent since the start of the fourth quarter.

Optimism about financial sector earnings strengthened after JPMorgan Chase's results on Friday beat targets.

But not all analysts have been bullish on the sector: Data from Thomson Reuters StarMine on Friday suggested most banks would miss earnings expectations.

Hurting the Dow were shares of American Express Co , down 2.8 percent at $45.06. The company said restructuring charges, related to closing down some locations in its global servicing network, would reduce fourth-quarter earnings.

The Dow Jones industrial average <.DJI> was down 10.14 points, or 0.09 percent, at 11,827.79. The Standard & Poor's 500 Index <.SPX> was down 10.62 points, or 0.82 percent, at 1,284.40, its biggest daily percentage loss since Nov 23. The Nasdaq Composite Index <.IXIC> was down 32.00 points, or 1.16 percent, at 2,733.84.

Shares of Cree and its rival LED lighting makers fell after it reported weaker-then-expected sales, profit and a current quarter outlook late on Tuesday.

Rubicon Technology Inc slumped 6.5 percent to $21.03 and Veeco Instruments Inc tumbled 5.2 percent to $46.62. Shares of circuit maker Linear Technology Corp also dove 3.3 percent to $34.93 and semiconductor provider Marvell Technology Group fell 3.1 percent to $21.22.

Among bright spots for fourth-quarter results were earnings from Apple Inc and International Business Machines Corp , both released after Tuesday's closing bell.

Apple's profit blew past Wall Street's expectations on strong sales of iPhones, iPads and Mac computers. The stock was up 0.6 percent at $342.63 as a number of brokerages, including Goldman Sachs and Bank of America Merrill, raised their price targets on the stock.

Shares of IBM, whose results also surpassed expectations, rose 3.3 percent to $155.60.

We saw two of the big names report last night with more-than solid numbers, and that, if anything, validates the move we had in the fourth quarter, said Bennett Gaeger, managing director at Stifel Nicolaus in Baltimore.

But in the semis, people are taking some profits off some of the better performers.

(Reporting by Caroline Valetkevitch; Additional reporting by Alina Selyukh; Editing by Jan Paschal)

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