US STOCKS-Wall St sinks as tumbling China stocks stoke growth fears

* Chinese shares drop the most in eight years

* Oil prices, commodities lower following China equity selloff

* Dow hits lowest level in five months

* Teva, Allergan (NYSE: AGN - news) jump after $40.5 bln deal

* Indexes down: Dow 0.86 pct, S&P 0.69 pct, Nasdaq 1.0 pct (Updates to late afternoon trade, adds comment)

By Noel Randewich

July 27 (Reuters) - Wall Street sank on Monday, with the Nasdaq down 1 percent, after the steepest decline in Chinese stocks in eight years increased concerns that cooling growth in the world's No. 2 economy could hurt its key trading partners.

The Dow Jones industrial average fell to its lowest since February, while the Nasdaq composite touched a four-week low and the benchmark S&P 500 hit its lowest in over two weeks.

The NYSE showed 471 stocks at 52-week lows, the most in one day since Oct (HKSE: 3366.HK - news) . 15.

After Chinese shares plunged more than 8 percent, the country's top securities regulator said Beijing would keep buying shares to stabilize the market as an unprecedented rescue plan already in place appeared to sputter.

Commodity prices resumed a downward spiral, with the Thomson Reuters CRB commodities index hitting a six-year low and oil hitting a four-month low.

Chinese ADRs including Alibaba and Baozun slid.

"It's hard to assess whether China single-handedly can deep six the market," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "A significant slowdown in China impacts not just the U.S. but global players as well."

At 3:34 p.m., the Dow Jones industrial average fell 151.32 points, or 0.86 percent, to 17,417.21, the S&P 500 lost 14.38 points, or 0.69 percent, to 2,065.27 and the Nasdaq Composite dropped 50.98 points, or 1 percent, to 5,037.65.

Nine of the 10 major S&P 500 sectors were lower, with the energy index's 1.65 percent fall leading the decliners.

With second-quarter reports well under way, analysts expect overall earnings of S&P 500 companies to dip 0.3 percent and revenue to decline 3.9 percent, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data.

Such results would hurt already relatively high price valuations. The S&P 500 trades near 16.9 times forward 12-month earnings, above the 10-year median of 14.7 times, according to StarMine data.

"Valuations are a concern right now," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin. "We really need to see corporate revenue growth."

Investors were also keeping a sharp eye on economic data ahead of this week's two-day U.S. Federal Reserve meeting, the last before September, which still looms as the first possible date for an interest rate increase.

Teva Pharmaceutical's shares jumped as much as 13.3 percent to a record high of $70.06 after it agreed to buy Allergan generic drugs business for $40.5 billion, giving up on its bid to buy Mylan (Frankfurt: 6MY.F - news) . Allergan was up 7.02 percent at $329.87 while Mylan fell 14.63 percent to $56.28.

Fiat Chrysler fell 4.8 percent at $14.42 after a U.S. auto safety watchdog announced a $105 million fine against the automaker over lapses in safety recalls.

Declining issues outnumbered advancing ones on the NYSE by 2,266 to 811. On the Nasdaq, 1,997 issues fell and 806 advanced.

The S&P 500 was posting 3 new 52-week highs and 57 new lows; the Nasdaq was recording 18 new highs and 238 new lows. (Additional reporting by Tanya Agrawal; Editing by Bernadette Baum and Nick Zieminski)