US STOCKS-Wall St drops on dollar's rise, oil's decline

* Energy shares give up gains as oil retreats

* Financials drag; Fifth Third Bancorp off 8 pct

* Dow off 0.8 pct, S&P off 0.9 pct, Nasdaq off 0.3 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to midday; changes byline)

By Angela Moon

NEW YORK, Oct 26 (Reuters) - U.S. stocks fell on Monday, dragged lower by materials and financial shares, erasing earlier gains as the U.S. dollar rose and commodity prices waned.

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.

But the Nasdaq's losses were kept in check by gains in Microsoft Corp (MSFT.O). The stock climbed 2.6 percent to $28.75 after a number of analysts raised their price targets on the company, following the software giant's recent quarterly results on Friday that surged past expectations. For details, see [ID:nBNG463985]

The Dow Jones industrial average .DJI was down 83.96 points, or 0.84 percent, at 9,888.22. The Standard & Poor's 500 Index .SPX was down 9.22 points, or 0.85 percent, to 1,070.38. The Nasdaq Composite Index .IXIC was down 7.18 points, or 0.33 percent, at 2,147.29.

The S&P financial index .GSPF was off 2.1 percent. Shares of Fifth Third Bancorp (FITB.O) and SunTrust Banks Inc (STI.N) fell after veteran banking analyst Richard Bove said many regional banks may not show a profit until 2011 and downgraded both to "sell" from "neutral."

Fifth Third's stock fell 8 percent to $9.51 on Nasdaq and SunTrust shares lost 5.4 percent to $19.86 on the New York Stock Exchange. [ID:nBNG499157]

An S&P index of energy shares .GSPE shed 0.7 percent. Chevron (CVX.N) lost 0.5 percent to $76.29 and weighed on the Dow industrials.

McGraw-Hill Cos Inc (MHP.N) shares declined 2.2 percent to $29.82 after the publishing and financial information services company reported a 14 percent drop in third-quarter earnings. (Reporting by Angela Moon; Editing by Jan Paschal)