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 <.GSPF> dropped 1.7 percent and a Dow Jones index of home builders' stocks <.DJUSHB> fell 1.9 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 Monday note there could be an agreement to phase out the home buyer tax credit over 13 months, rather than expand it, as some had hoped.

A media report quoted ISI as saying the tax credit probably would not be extended when it expires at the end of November.

This caused stocks to drop, with major averages falling more than 1 percent, due to concern the housing market would lose a leg of support that has stabilized that industry of late.

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 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.

The Dow Jones industrial average <.DJI> was down 80.64 points, or 0.81 percent, at 9,891.54. The Standard & Poor's 500 Index <.SPX> was down 9.55 points, or 0.88 percent, at 1,070.05. The Nasdaq Composite Index <.IXIC> was down 9.71 points, or 0.45 percent, at 2,144.76.

The energy and materials sectors, which had helped lift major indexes more than 1 percent earlier, reversed course as U.S. crude futures fell below $80 a barrel, while the ICE Futures dollar index <.DXY> gained 0.7 percent.

(Reporting by Angela Moon; Editing by Kenneth Barry)

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