US STOCKS-Wall St drops as banks fall on credit jitters

(Updates with market dropping)

NEW YORK, July 14 (Reuters) - U.S. stocks fell on Monday as fears of more credit crisis fallout hit bank stocks, overshadowing the government's proposed rescue plan for mortgage finance companies Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research).

The KBW bank index .BKX slid more than 7 percent.

The Dow Jones industrial average .DJI declined 52.59 points, or 0.47 percent, to 11,047.95. The Standard & Poor's 500 Index .SPX fell 9.65 points, or 0.78 percent, to 1,229.84. The Nasdaq Composite Index .IXIC tumbled 24.08 points, or 1.08 percent, to 2,215.00. (Reporting by Ellis Mnyandu; Editing by Kenneth Barry)