Stocks fell at the open on Monday as a spike in the U.S. dollar weighed on commodity prices and dried up bids on other risky assets.

Further weighing on equities, the euphoria over Europe's plan to contain its sovereign debt crisis cooled and Italian and Spanish bond yields soared, prompting the European Central Bank to buy their debt.

Despite early losses, the benchmark S&P 500 index was still on track for its largest monthly percentage gain since early 1987.

We had a massive run because of Europe on the plus side, and there's a question mark on whether what has been put in place is enough to buy Italy and Spain more time, said Peter Boockvar, equity strategist at Miller Tabak in New York.

The Dow Jones industrial average dropped 126.96 points, or 1.04 percent, at 12,104.15. The Standard & Poor's 500 Index fell 15.41 points, or 1.20 percent, at 1,269.68. The Nasdaq Composite Index slid 30.02 points, or 1.10 percent, at 2,707.13.

The U.S. dollar shot up to a three-month high against the yen as the government of Japan intervened to curb its currency's appreciation, which is hurting the export-based economy.

The higher greenback pressured commodity prices, with copper off 2.7 percent. Materials .GSPM was the worst-performing S&P sector, down 2.5 percent.

Shares of Freeport-McMoRan Copper & Gold Inc. dropped 4 percent to $41.07 but were up nearly 35 percent so far in October.

After a solid month of gains, the (higher) dollar is giving traders a reason to shy from the risk trade and take some profits, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

In corporate news, MF Global Holdings Ltd. was suspended from doing new business with the New York Federal Reserve Bank, and shares of the troubled brokerage were halted as it neared a deal on its future.

Banks stocks were among the worst performing in early trading, with the S&P financial sector down 2 percent.