* Brent crude nears 7-year low after OPEC meeting
* Airline stocks jump on falling oil prices
* Keurig soars on $13.9 bln buyout deal
* Indexes down: Dow 0.98 pct, S&P 1.01 pct, Nasdaq 0.94 pct (Updates to early afternoon)
By Tanya Agrawal
Dec 7 (Reuters) - Wall Street fell on Monday as energy and raw material stocks took a hit, with oil prices falling to their lowest in nearly seven years.
Brent crude and U.S. crude extended their decline and fell as much as 5 percent, after OPEC's meeting last week failed to address a growing supply glut.
A stronger dollar also made it more expensive to hold crude positions. The dollar rose for a second day and was up 0.3 percent at 98.66 against a basket of major currencies.
Oil majors Exxon and Chevron fell about 3 percent and were the biggest drags on the S&P and among the stocks weighing on the Dow.
The S&P materials index fell 1.9 percent, its steepest fall in three weeks, with Dow Chemicals and DuPont falling about 2 percent.
The impact of the fall in oil prices offset some of Friday's gains that were triggered by a strong jobs report.
The solid November employment report showed that the economy was strong enough to absorb an interest rate hike, which is widely expected to be raised when the Federal Reserve meets on Dec. 15-16.
"The Fed is pretty locked in regarding a hike next week and any fall in commodity prices will be seen as transitory factors," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
However, Hogan said a further plunge in oil prices and a stronger dollar could mean subsequent rate hikes will be gradual.
At 12:42 p.m. ET (1742 GMT) the Dow Jones industrial average was down 175.32 points, or 0.98 percent, at 17,672.31, the S&P 500 was down 21.17 points, or 1.01 percent, at 2,070.52 and the Nasdaq Composite was down 48.17 points, or 0.94 percent, at 5,094.10.
Eight of the 10 major S&P sectors were lower, with the energy index falling 4.1 percent, putting it on track for its biggest single-day decline since the end of August.
Falling oil prices helped airline stocks, with JetBlue Airways up 4.1 percent and Republic Airways up 2.9 percent. The S&P 1500 airlines index hit its highest level since January.
Inaccurate forecasts of growth, employment and inflation by the Fed have pulled the central bank in conflicting directions and driven the decision to keep rates low for so long, St. Louis Federal Reserve President James Bullard said.
Traders see a 79 percent chance that the central bank will increase rates for the first time in nearly a decade, according to the CME Group's FedWatch.
Keurig Green Mountain's shares soared 73.1 percent to $89.51 after the coffee-pod maker agreed to be bought for about $13.9 billion.
Office Depot slumped 13.9 percent to $5.71 after the NY Post reported that the government will vote to block its merger with Staples. Staples was down 9.6 percent at $11.17.
Declining issues outnumbered advancing ones on the NYSE by 2,535 to 478. On the Nasdaq, 2,094 issues fell and 644 advanced.
The S&P 500 index showed 15 new 52-week highs and 27 new lows, while the Nasdaq recorded 53 new highs and 139 new lows. (Reporting by Tanya Agrawal; Editing by Anil D'Silva)