Stocks fell on Monday as bank shares declined on fears of bigger-than-expected loan losses related to housing, while a drop in crude oil prices hurt energy shares.

Washington Mutual Inc., the largest U.S. savings and loan, may set aside $500 million more than it had previously expected for loan losses in 2007, its chief executive said, blaming a near perfect storm in the U.S. housing market.

Greater loan loss reserves in the financial sector without a doubt, that's probably going to be more common, said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc. in St. Louis.

The Dow Jones industrial average was down 76.08 points, or 0.58 percent, at 13,037.30. The Standard & Poor's 500 Index was down 12.20 points, or 0.84 percent, at 1,441.35. The Nasdaq Composite Index was down 26.60 points, or 1.04 percent, at 2,539.10.

Shares of Washington Mutual were down 3 percent to $33.98 on the New York Stock Exchange. Rival Wachovia Corp was down 1.5 percent to $47.33 and Wells Fargo stock lost 0.6 percent to $35.02.

Home builders were also a big drag on the market. Shares of Lennar Corp fell 3.2 percent to $25.64 and shares of Pulte Homes Inc were down 2.9 percent to $15.07.

San Francisco Fed President Janet Yellen said the turmoil in financial markets has added appreciably to downside risk for the economy, but that goals of price stability and full employment must be the focus of policy-makers and not shielding investors from losses.

Yellen was the first of several Federal Reserve officials scheduled to speak on Monday, and their comments are likely to be closely scrutinized for any hints how the Fed's policy-setting arm will act when it meets to decide on interest rates on September 18.

Calls for the Fed to cut rates from corporate America and investors have gotten louder in the past few weeks as tightening in the credit markets have sent the stock market on a roller-coaster ride.

Shares of Exxon Mobil Corp were down 1.7 percent to $84.31, making it the top-weighted drag on the S&P. Oil futures were down 65 cents to $76.03 on expectations that OPEC may surprise markets with a production increase on Tuesday.

Stocks initially opened the session higher, led by technology shares after Apple Inc. said its iPhone sales hit 1 million on Sunday, a few weeks ahead of target.

Apple shares were up 2.3 percent to $134.86. The stock was the top-weighted gainer on the S&P and Nasdaq.

In another sign that recession fears were mounting, the biggest gainers were defensive stocks such as consumer goods maker Procter & Gamble and fast-food chain McDonald's Corp.

P&G shares were up 0.5 percent to $65.78 and were the second-biggest boost to the S&P. McDonald's stock was up 1.3 percent to $49.91 on the NYSE.

S&P Investment U.S.