Stocks fell on Monday as traders rushed to buy protection against a further decline in the market after comments from Germany's finance minister heightened concerns about the euro zone's debt crisis.

German Finance Minister Wolfgang Schaeuble said European Union governments would adopt a five-point plan at the Brussels meeting on October 23, but we won't have a definitive solution this weekend, he added.

Optimism the euro zone was making progress in resolving its sovereign debt crisis had pushed the S&P 500 to the top of a two-month trading range.

The index had risen for two straight weeks for the first time since July and recorded its best two-week performance since 2009. The gains had also put the Dow industrials and the Nasdaq back into positive territory for the year.

We were bound to see some sort of a retracement after indexes shot up so much in so little time. Now that we realize again that there will be bumps along the road (to recovery in the debt crisis), it's giving investors a reason to sell, said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

The mood is still bearish and will be for a while.

The CBOE Volatility index VIX <.VIX>, Wall Street's so-called fear gauge, rose 16 percent to 32.82, its highest one-day jump since August.

The cautious comment from Schaeuble also sent the euro lower against the dollar and weighed on financial stocks. The KBW bank index <.BKX> lost 3.3 percent.

Compounding pressure on the sector were disappointing earnings from Wells Fargo & Co , which fell 7 percent to $24.80 and was the biggest weight on the S&P 500.

The Dow Jones industrial average <.DJI> was down 237.84 points, or 2.04 percent, at 11,406.65. The Standard & Poor's 500 Index <.SPX> was down 23.66 points, or 1.93 percent, at 1,200.92. The Nasdaq Composite Index <.IXIC> was down 56.47 points, or 2.12 percent, at 2,611.38.

Events in Europe overshadowed a $21 billion deal by Kinder Morgan Inc to buy rival El Paso Corp , combining the two largest natural gas pipeline operators in North America in a huge bet on the fast-growing market for that fuel.

El Paso's shares surged 24.9 percent to $24.46 and Kinder Morgan shares jumped 6.1 percent to $28.54.

In its quarterly results, Wells Fargo missed Wall Street's earnings estimates by 1 cent a share as interest income fell below expectations.

Shares of Citigroup Inc edged down 0.8 percent to $28.17. The bank reported higher third-quarter earnings as it set aside less money to cover bad loans and recorded an accounting gain available to banks in turbulent markets.

Of the 45 companies in the S&P 500 that have reported earnings, 62 percent have beaten analyst expectations, according to Thomson Reuters data.

(Editing by Padraic Cassidy)