US STOCKS-Wall St drops as investors brace for presidential debate

(Adds detail on bank stocks)

* Pfizer (NYSE: PFE - news) falls after abandoning plan to split

* U.S. presidential debate kicks off at 9 p.m. ET

* Deutsche Bank (LSE: 0H7D.L - news) down, weighs on U.S. financials

* Indexes fall: Dow 0.91 pct, S&P 0.86 pct, Nasdaq (Frankfurt: 813516 - news) 0.91 pct

By Noel Randewich

Sept 26 (Reuters) - Wall Street fell on Monday as Deutsche Bank weighed on financials and investors hunkered down for the first debate between U.S. presidential candidates Hillary Clinton and Donald Trump.

Big banks led the declines as investors worried that Deutsche Bank might need to add additional capital to pay for a$14 billion U.S. demand to settle claims it missold mortgage-backed securities.

Its U.S.-listed shares fell 7.06 percent to a record low after the bank said it had no need for German government assistance, a response to an earlier report that Chancellor Angela Merkel had warned not to expect any.

The race for the White House has so far had little discernible effect on the sentiment but that may change if Monday's encounter leaves a decisive winner.

With (Other OTC: WWTH - news) just over six weeks until the Nov. 8 vote, some investors see the neck-and-neck contest sparking volatility in sectors including health insurers, drugmakers and industrials.

"Wall Street favors Hillary at this point because she is a known commodity. Trump is a wild card," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa. "But I don't think it's too late for Wall Street to warm up to Trump."

Pfizer Inc fell 1.81 percent after it decided against splitting into two. The stock was the biggest drag on the S&P 500 healthcare index, which declined 1.22 percent.

The Nasdaq biotechnology index dipped 1.3 percent, with cancer drugmaker Celgene Corp (Swiss: CELG.SW - news) falling 2.85 percent.

Many view a potential Clinton presidency as negative for pharmaceutical companies because of criticisms she has made about high drug prices. Trump has promised to dismantle the Affordable Care Act, which has boosted health insurers since 2010.

The S&P financial index fell 1.5 percent, with JPMorgan's 2.19 percent decline and Bank of America (Swiss: BAC.SW - news) Corp's 2.77 percent slide weighing most. The S&P 500 bank index dropped 2.24 percent, its steepest drop since July 5 in the wake of the Brexit vote.

The Dow Jones industrial average dropped 0.91 percent to end at 18,094.83 points and the S&P 500 lost 0.86 percent to 2,146.1.

The Nasdaq Composite lost 0.91 percent to finish at 5,257.49.

It was the second consecutive day of declines on Wall Street, leaving the S&P 500 2 percent below its record high set in May but still up 5 percent in 2016.

"Investors are acting extremely nervous with regards to the debate ... and it highlights the fact that the markets are not focusing on the health of the economy, interest rates and geopolitical events," said Robert Pavlik, chief market strategist at Boston Private Wealth.

The CBOE Market Volatility index, also known as Wall Street's "fear gauge", rose 17.9 percent, clocking its biggest percentage gain in two weeks.

Declining issues outnumbered advancing ones on the NYSE by a 2.56-to-1 ratio; on Nasdaq, a 3.16-to-1 ratio favored decliners.

The S&P 500 posted two new 52-week highs and one new low; the Nasdaq Composite recorded 63 new highs and 31 new lows.

About 5.9 billion shares changed hands on U.S. exchanges, short of the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data. (Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski and Lisa Shumaker)