* Financials lead declines
* Dollar hits lowest vs yen since 2014
* Indexes down: Dow 1 pct, S&P 1.2 pct, Nasdaq 1.5 pct (Updates with Gap shares down after the bell)
By Caroline Valetkevitch
April 7 (Reuters) - U.S. stocks dropped on Thursday as oil prices slid and worries about the global economy resurfaced, dragging down the dollar against the yen and causing investors to flee riskier assets.
The S&P 500 posted its biggest daily percentage loss in about six weeks, while the growth worries weighed especially on interest-rate sensitive financials, strategists said. The group fell 1.9 percent and was the biggest drag on the S&P 500.
"There's concern about a global slowdown," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
"I think what we're seeing is the market believes that these (global central bank) policies and discussions on negative rates have diminishing returns at this point and are creating more harm than good, more uncertainty than stability."
The Dow Jones industrial average closed down 174.09 points, or 0.98 percent, to 17,541.96, the S&P 500 lost 24.75 points, or 1.2 percent, to 2,041.91 and the Nasdaq Composite dropped 72.35 points, or 1.47 percent, to 4,848.37.
The dollar fell as much as 1.6 percent against the yen .
Minutes from the Federal Reserve's March meeting released on Wednesday pointed to concerns about the U.S. central bank's limited ability to tackle a global economic slowdown.
Minutes from the European Central Bank's March policy meeting on Thursday showed that governors from around the euro zone had been told the global economic outlook had got worse.
Crude oil settled lower on Thursday after data showed higher weekly inventories. The S&P energy index was down 0.6 percent.
Adding to investor caution, first-quarter earnings kick into high gear next week, with a 7.4-percent year-over-year decline projected for S&P 500 companies, according to Thomson Reuters data. Some strategists argue the recent sharp drop in earnings forecasts could result in more positive surprises.
Verizon Communications Inc shares were down 2.8 percent at $52 after Bloomberg reported Verizon plans to make a first-round bid for Yahoo Inc's web business next week. Yahoo was down 1.3 percent at $36.17.
Volume was slightly above the short-term average. About 7.2 billion shares changed hands on U.S. exchanges, compared with the 7.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.
After the bell, shares of Gap fell 9.1 percent to $25.16 following the release of its March sales results.
Declining issues outnumbered advancing ones on the NYSE by 2,349 to 677, for a 3.47-to-1 ratio on the downside; on the Nasdaq, 2,063 issues fell and 751 advanced for a 2.75-to-1 ratio favoring decliners.
The S&P 500 posted seven new 52-week highs and one new low; the Nasdaq recorded 23 new highs and 23 new lows. (Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski and James Dalgleish)