US STOCKS-Wall St declines on European banking concern

* Bank shares fall on concerns in European sector

* Oracle rises after Hurd hiring

* Indexes off: Dow 0.7 pct, S&P 0.8 pct, Nasdaq 0.7 pct

* For up-to-the-minute market news see [STXNEWS/US] (Updates to midday)

By Caroline Valetkevitch

NEW YORK, Sept 7 (Reuters) - U.S. stocks fell on Tuesday, led by declines in financial shares as reports on the European banking system renewed worries over the sector's health.

Bank of America Corp (BAC.N) shed 1.6 percent to $13.28, and JP Morgan Chase & Co (JPM.N) was off 1.6 percent at $38.53. The KBW Bank index .BKX lost 2.2 percent, and the S&P financial index .GSPF fell 1.6 percent.

The losses follow Wall Street's best week in the last two months and followed a long holiday weekend. Indexes had regained ground as stronger-than-expected economic data helped to quell fears of a double-dip recession.

European bank stress tests intended to measure the strength of major lenders understated their holdings in potentially risky government debt, the Wall Street Journal reported.

Separately, Germany's banking association said the country's 10 biggest banks may need 105 billion euros ($134 billion) in new capital as regulators revamp rules designed to prevent future crises. For details, see [ID:nLDE6850Q9]

"There's concern about the health about the European banking sector ... that fear kind of comes and goes," said Tom Schrader, managing director, U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore.

"If the banks in England get a cold, it's certainly going to cause the banks here to sneeze," he added.

Barclays Plc's (BCS.N) U.S.-traded shares dropped 5.4 percent to $19.18, while Deutsche Bank AG's (DB.N) ADRs were down 3 percent at $62.63, and UBS AG (UBSN.VX)(UBS.N) ADRs dipped 2.6 percent to $17.58.

The Dow Jones industrial average .DJI dropped 71.06 points, or 0.68 percent, at 10,376.87. The Standard & Poor's 500 Index .SPX was down 8.77 points, or 0.79 percent, at 1,095.74. The Nasdaq Composite Index .IXIC slid 16.16 points, or 0.72 percent, at 2,217.59.

Traders said volume was light following the U.S. Labor Day holiday. Decliners topped advancers by about five to two on the New York Stock Exchange.

Among advancers, Oracle Corp (ORCL.O) jumped 4.8 percent to $24.02 after the world's third-largest software maker hired Mark Hurd, the former boss at Hewlett-Packard Co (HPQ.N), as president. Hurd resigned from HP in August after a probe into sexual harassment allegations. [ID:nN06144965] (Reporting by Caroline Valetkevitch; additional reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)