* China shares fall 6.7 pct
* Financial shares lower
* Commodities slide; oil down 3 pct
* Indexes off: S&P 1 pct, Dow 1.3, Nasdaq 1.4
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(Updates to mid-morning)
By Edward Krudy
NEW YORK, Aug 31 (Reuters) - U.S. stocks fell on Monday after Chinese equities dropped sharply and commodities fell on concerns that asset prices have run ahead of the economic realities.
Financial shares also pulled back after a recent rally,
with American International Group Inc
Weighing on sentiment, the Shanghai Composite Index <.SSEC> dived 6.7 percent to a three-month closing low and recorded its second-biggest monthly loss in 15 years on worries that corporate earnings failed to justify stock valuations. [ID:nHKG349309]
The slide hurt commodity prices, with oil down more than 3 percent.
"Investors in the United States felt it was important for China to help lead the path to economic recovery," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville. "If their markets are going to misbehave, it opens the question of whether they are going to see a recovery."
The Dow Jones industrial average <.DJI> was down 96.36 points, or 1.01 percent, at 9,447.84. The Standard & Poor's 500 Index <.SPX> was down 12.82 points, or 1.25 percent, at 1,016.11. The Nasdaq Composite Index <.IXIC> was down 27.66 points, or 1.36 percent, at 2,001.11.
A regional report that showed manufacturing in the U.S. Midwest was on the cusp of expansion did little to boost sentiment, with all three major indexes falling more than 1 percent by mid-morning.
The Institute for Supply Management-Chicago said on Monday its index of Midwest business activity rose in August to 50.0 from 43.4 in July. (Additional reporting by Leah Schnurr; Editing by Padraic Cassidy)