US stocks fell for a second straight session as investors ditched home builders and financials on fears that a federal home buyer tax credit might be phased out, while commodity shares succumbed to pressure from the higher US dollar.

Trading was choppy. Stocks initially started on firmer footing, with indexes up more than 1 percent shortly after the open, but the bounce quickly faded as the US dollar rebounded and investors fretted about the financial sector's prospects.

The Dow Jones industrial average fell 104.22 points, or 1.05 percent, at 9,867.96. The Standard & Poor's 500 Index shed 12.65 points, or 1.17 percent, at 1,066.95. The Nasdaq Composite Index lost 12.62 points, or 0.59 percent, at 2,141.85.

European stocks fell for a third session in a row as a sharp drop in oil and a rebound in the dollar sparked a late selloff, with ING sinking 18 percent after it unveiled plans to split up the company.

The FTSEurofirst 300 index of top European shares ended 1.2 percent lower at 996.50 points, its lowest closing level in nearly two weeks.

The Nikkei average hit its highest close in four weeks, lifted by exporters such as Honda Motor Co on a weaker yen, while Kawasaki Heavy jumped on a report of a high-speed rail project in China.

Market players said the weaker yen as well as optimism about Japan's earnings season, which heads into full swing later this week, helped push up the market.

The benchmark Nikkei climbed 0.8 percent or 79.63 points to 10,362.62, its highest finish since Sept. 24.