NEW YORK (Reuters) - U.S. stocks fell more than 1 percent on Thursday as the European Commission issued a warning regarding Italy's budget and concerns mounted over the possibility of strained relations between the United States and Saudi Arabia, denting investors' appetite for risk.

The Dow Jones Industrial Average fell 327.23 points, or 1.27 percent, to 25,379.45, the S&P 500 lost 38.32 points, or 1.36 percent, to 2,770.89 and the Nasdaq Composite dropped 154.18 points, or 2.02 percent, to 7,488.52.

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler)

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