* Cyprus reworks divisive bank tax, delays vote
* Banks lead decline; BofA off 1.6 pct, JPMorgan off 2 pct
* U.S. home builder sentiment eases in March-NAHB
* Indexes off: Dow 0.4 pct, S&P 0.7 pct, Nasdaq 0.7 pct
By Angela Moon
NEW YORK, March 18 (Reuters) - U.S. stocks fell on Monday as a divisive bailout plan for Cyprus knocked bank stocks lower on the view that the plan's tax on bank deposits could spread and threaten stability in the euro zone.
The losses on Wall Street also gave investors a reason to lock in profits from the recent rally.
"It seems liked it shocked a lot of people initially, but if you look at the bigger picture and see how small Cyprus is, it's not a huge deal," said Joe Bell, senior equity analyst at Schaeffer's Investment Research.
"But the worry is really about the possibility of contagion to other European countries. Financials are lower here as well also because of the worry that 'could it also happen here' which I don't think is the case," Bell (Swiss: BELL.SW - news) said.
The Dow Jones industrial average was down 53.76 points, or 0.37 percent, at 14,460.35. The Standard & Poor's 500 Index was down 10.44 points, or 0.67 percent, at 1,550.26. The Nasdaq Composite Index was down 21.43 points, or 0.66 percent, at 3,227.64.
The Dow closed at a record high of 14,539 just on Thursday. The blue chip index is still up about 10 percent for the year and the S&P 500 is up about 9 percent so far in 2013.
Hard-hit European stocks trimmed some losses after Cypriot ministers sought to revise the plan to seize money from bank deposits to help pay for the Mediterranean island's 10 billion euro ($13 billion) bailout before a parliamentary vote on Tuesday.
The weekend announcement that Cyprus would impose a tax on bank accounts by the European Union broke with previous practice that depositors' savings were sacrosanct. The euro and stock markets fell on concern the euro zone crisis was returning.
Europe's Airbus (Paris: NL0000235190 - news) has signed a 18.4 billion-euro deal ($24 billion) with low-cost Indonesian carrier Lion Air for 234 single-aisle passenger planes, poaching one of archrival Boeing (NYSE: BA - news) 's fastest growing customers.
To get its 787 Dreamliner flying again, Boeing Co is testing the plane's volatile battery system to a rigorous standard that the company itself helped develop - but that it never used on the jet. Boeing shares were down 0.9 percent at $85.67.
Highbridge Capital Management, a hedge fund manager owned by JPMorgan Chase & Co (NYSE: JPM - news) , has raised a $5 billion mezzanine debt fund, a spokesman said on Sunday, the latest alternative asset firm seeking to seize on corporate credit opportunities.
Data showed U.S. homebuilder sentiment slipped in March, falling to the lowest level in five months as supply chain concerns and rising costs dented enthusiasm. Market reaction was muted.
U.S. futures regulators are looking into whether high-speed traders indulged in "wash trading," a strategy in which they improperly buy and sell futures contracts without taking a position in the market, the Wall Street Journal reported, citing people familiar with the probes.