* Brent crude nears 7-year low after OPEC meeting
* Airline stocks jump on falling oil prices
* Keurig soars on $13.9 bln buyout
* Office Depot, Staples fall on regulatory deal hurdle
* Indexes down: Dow 0.89 pct, S&P 1 pct, Nasdaq 1.04 pct (Updates to afternoon, adds commentary, changes byline)
By Sinead Carew
Dec 7 (Reuters) - U.S. stocks fell on Monday with energy stocks suffering their worst day since August as oil prices fell to their lowest point in nearly seven years and materials stocks also falling sharply.
Brent crude and U.S. crude fell more than 5 percent, after OPEC's meeting last week failed to address a growing supply glut.
The S&P energy sector energy index fell 4.4 percent and oil majors Exxon and Chevron were the biggest drags on the S&P, with roughly 3-percent declines.
"The biggest watch is what's going to happen in oil today, are we going to double-bottom," said Matt Lloyd, chief investment strategist at Advisors Asset Management in Monument, Colorado. "The story is overwhelming to the negative side so you've got to wait for oil to bottom out. Then we believe it's going to go up because demand has been increasing and we think it is underestimated for next year."
The oil decline also hurt the S&P materials index which was down 1.9 percent, its steepest fall in three weeks.
Materials stocks were also being hurt by "an overhang from the continuing slowing of the Chinese economy," according to Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
At 3:18 p.m., the Dow Jones industrial average fell 159.34 points, or 0.89 percent, to 17,688.29, the S&P 500 lost 20.87 points, or 1 percent, to 2,070.82 and the Nasdaq Composite dropped 53.46 points, or 1.04 percent, to 5,088.81.
Investors were also wary after Friday's November employment report showed that the economy was strong enough to absorb an interest rate hike, widely expected when the Federal Reserve meets on Dec. 15-16.
"Everybody knows they're going to raise rates and the waiting is often worse than the punishment," said Lloyd, noting that hesitation ahead of the Fed meeting helped push the broader market down. "If you don't have a lot of depth in buying, any selling pressure will overwhelm the market and move it down."
Traders see a 79-percent chance that the central bank will increase rates next week for the first time in nearly a decade, according to the CME Group's FedWatch.
Falling oil prices helped airline stocks. JetBlue Airways and Delta Airlines were the biggest gainers with gains approaching 4 percent. The S&P 1500 airlines index hit its highest level since January.
Keurig Green Mountain's shares soared 72.4 percent to $89.14 after the coffee-pod maker agreed to be bought for about $13.9 billion.
Office Depot slumped 16.4 percent to $5.5 after the U.S. Federal Trade Commission filed complaint to block its merger with Staples, which fell 14 percent to $10.60.
Declining issues outnumbered advancing ones on the NYSE by 2,567 to 508, for a 5.05-to-1 ratio; on the Nasdaq, 2,205 issues fell and 614 advanced for a 3.59-to-1 ratio favoring decliners.
The S&P 500 posted 15 new 52-week highs and 28 lows; the Nasdaq recorded 55 new highs and 155 lows. (Additional reporing by Marcus E. Howard in New York and Tanya Agrawal in Bengaluru; Editing by Anil D'Silva and Nick Zieminski)