In my query letter, is it acceptable to put "commercial fiction" as the genre or are there more specific subdivisions of the term which agents like to see? Commercial fiction sounds a little vague and general but my novel is not in a specific genre and it isn't really literary as such so commercial fiction seems like the best category.
First, let's remember that "commercial fiction" isn't a genre, it's a category.
Other categories are: non-fiction, poetry, memoir, textbooks.
Genres are: mystery, science-fiction/fantasy, romance, western.
If your book would not be at home with novels of crime, sff, western or romance, then commercial fiction is a good general description.
One good way to figure out your "herd" is to look where books like yours are shelved or categorized. Don't use Amazon for this. They have the screwiest sorting system I've ever seen. Your best bet is the library. Librarians sort things with standardized criteria and exactitude; they're pretty good at it.