The Dow industrials and the S&P 500 index fell on Monday as a decline in oil and other commodity prices hurt energy and materials stocks.

But the Nasdaq rose, buoyed by a broker's upgrade on the biotechnology sector.

Light crude futures fell more than 3 percent, settling below the $70 a barrel, hurt by concerns about demand despite hopes for economic recovery. The Reuters-Jefferies CRB index of commodities <.CRB> tumbled 2.2 percent, its largest percentage drop in five weeks.

The dollar index <.DXY> rose 0.4 percent after three weeks of declines and further hurt commodity prices, as investors scaled back short positions before a Federal Reserve decision on interest rates this week.

Energy <.GSPE> and materials <.GSPM> ranked as the S&P 500's worst-performing sectors, with oil services company Halliburton Co down 2 percent at $27.60 and petroleum refiner Sunoco down 1.7 percent at $27.95, while lumber producer Weyerhaeuser Co fell 2.7 percent to $38.59.

The market has risen in the last several months, based on the idea of the reflation trade, said Chip Hanlon, referring to bets on rising hard asset prices as the economy recovers, coupled with easy access to money at low interest rates.

Hanlon, president of Delta Global Advisors Inc in Huntington Beach, California, said people can expect when stocks sell off that the U.S. dollar will rally, which will inflict particular pain on raw materials.

The Dow Jones industrial average <.DJI> dropped 44.67 points, or 0.46 percent, to 9,775.53 and the Standard & Poor's 500 Index <.SPX> fell 3.60 points, or 0.34 percent, to 1,064.70. But the Nasdaq Composite Index <.IXIC> rose 4.55 points, or 0.21 percent, to 2,137.41.

Adding to the overall negative tone, the Conference Board's index of leading indicators posted a slightly weaker-than-expected gain in August.

Among the top drags on the blue-chip Dow Jones industrial average was Caterpillar , down 1.8 percent at $52.47 after it said dealer sales of its heavy machinery, engines and turbines fell 48 percent in August, though many markets showed signs of stabilization.

The Nasdaq rose slightly after Robert W. Baird upgraded Celgene Corp , pushing the stock up 5.2 percent to $55.28. The AMEX Biotech index <.BTK> gained 0.8 percent.

Computer maker Dell Inc announced a $3.9 billion proposal to take over Perot Systems Corp

. Perot soared 65.1 percent to $29.56, while Dell's stock slid 4 percent to $16.02.

Through Friday, the benchmark S&P 500 had risen 58 percent off a 12-year closing low in early March, partly because of strong earnings and optimism that an economic recovery is gaining strength. Investors' appetite for riskier assets had reduced the dollar's safe-haven appeal.

(Editing by Jan Paschal)