* Commodity shares fall after oil decline
* Financials drag on home buyer credit concerns
* Dow off 0.8 pct, S&P off 0.8 pct, Nasdaq off 0.3 pct
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By Angela Moon
NEW YORK, Oct 26 (Reuters) - U.S. stocks fell on Monday as financial shares tumbled over concern that a federal tax credit for home buyers would expire and as commodity-related shares lost ground on falling oil prices.
The S&P Financials index dropped 1.8 percent and a Dow Jones index of home builders' stocks .D fell 2.1 percent on market talk that an $8,000 federal tax credit for first-time home buyers scheduled to expire November 30 would not be extended.
Investment researchers ISI Group said in a note there could be an agreement to phase out the home buyer tax credit, according to Art Hogan, equity strategist at Jefferies & Co. Several traders attributed the market's drop to this note.
"Anytime you pull away a bailout, the market doesn't like it," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The Dow Jones industrial average was down 74.59 points, or 0.75 percent, at 9,897.59. The Standard & Poor's 500 Index was down 8.28 points, or 0.77 percent, at 1,071.32. The Nasdaq Composite Index .IXIC> was down 6.91 points, or 0.32 percent, at 2,147.56.
The energy and materials sectors, which had helped lift major indexes more than 1 percent earlier, reversed course as U.S. crude futures CLc1> fell below $80 a barrel, while the ICE Futures dollar index .DXY> gained 0.5 percent.
The market pared losses after Senator Bill Nelson said an agreement to extend the first-time home buyer credit should be worked out "later this week." (Reporting by Angela Moon; Editing by Kenneth Barry)