NEW YORK (TheStreet) -- U.S. stocks were taking a hit Monday as expanding pro-democracy demonstrations in Hong Kong fueled concerns about instability in China, the world's second-largest economy. Worries about U.S. third-quarter earnings persisted as the dollar continues to strengthen on expectations of diverging monetary policy.

The Dow Jones Industrial AverageI:DJI was down 0.73% on Monday morning. The S&P 500I:GSPC fell 0.68%. The NasdaqI:IXIC   sank 0.55%. 

Hong Kong's Hang Seng index fell nearly 2% amid violent clashes between pro-democracy protesters and police in Hong Kong.

The U.S. dollar index was slightly lower on Monday, but remained on pace to book its best quarterly performance since the third quarter of 2008 -- at the height of the financial crisis -- according to DailyFX's chief currency strategist John Kicklighter. Kicklighter said in a research note that monetary policy contrast is currently working in the dollar's favor. While the timing and pace for the Federal Open Market Committee's return to rate hikes is up for debate, even a period of basing would outweigh the active growth in accommodation by the Federal Reserve's three largest counterparts: the European Central Bank, the Bank of Japan, and the People's Bank of China, he said.

"Throw in upcoming disappointing Q3 earnings from S&P 500 multinational corporations due to currency instability and you get a U.S. stock market that stands on a fault line," added Michael Pento, president and founder of Pento Portfolio Strategies.

In company news Monday,Pacific Investment Management Co., or Pimco, suffered roughly $10 billion of withdrawals following the departure on Friday of co-founder Bill Gross, a person familiar with the matter told The Wall Street Journal.

Tibco Software (TIBX) jumped more than 20.91% after revealing that it is selling itself to Vista Equity Partners for $4.3 billion.

SoftBank is in talks to buy or otherwise link up with DreamWorks Animation (DWA) , people familiar with the negotiations told the Journal. DreamWorks soared over 19%.

Canada's Encana (ECA) - Get Report is buying Athlon Energy (ATHL) for $5.93 billion in an effort to boost is oil production by tapping into Texas's booming Permian Basin. Athlon shares rose 24.55%.

Apple (AAPL) - Get Report will be accused of prospering from illegal tax deals with the Irish government for more than two decades when the European Commission this week unveils details of a probe that could leave Apple with a record fine of as much as several billions of euros, the Financial Times reported. Apple lost 1.89%. 

U.S. personal income increased 0.3% in August, matching estimates, the Bureau of Economic Analysis reported Monday. Personal spending rose by a slightly higher-than-expected 0.5%. 

The pending home sales index for August fell 1%, according to the National Association of Realtors. Chicago Fed President Charles Evans said Monday at a meeting of the National Association of Business Economics in Chicago that "we should be exceptionally patient in adjusting the stance of U.S. monetary policy."

-- By Andrea Tse in New York

Follow @AndreaTTse