(Updated with commentary, stock prices.)

NEW YORK ( TheStreet) -- Stocks were unable to recover Monday afternoon as Wall Street reacted to a round of bank downgrades and a strengthening dollar.

The Dow Jones Industrial Average lost 104.22 points, or 1.1%, to 9,867.96, while the S&P 500 edged down 12.66 points, or 1.2%, to 1066.94. The Nasdaq gave up 12.62 points, or 0.6%, to 2141.85.

Financials were at the forefront of declines, with the KBW Bank Index losing 4.1% after Rochedale Securities analyst Dick Bove downgraded Fifth Third ( FITB), US Bancorp ( USB) and SunTrust ( STI). Shares of those banks fell 7.9%, 3.2% and 5.4%, respectively.

Homebuilder stocks were also lower, despite reports that Senate leaders are negotiating to extend an $8,000 tax credit for first-time homebuyers through 2010.

Toll Brothers ( TOL), Lennar ( LEN) and D R Horton ( DHI) lost more than 4% each.

The turn in the broader markets came as the dollar rebounded after making a new 14-month low early Monday.

At the same time, gold gave up $13.60, to $1,042.80 an ounce, while crude oil futures dropped $1.82, to $78.68 a barrel.

"The dollar is having a bit of a balance, and it's just really a continuation of weakness last week," says Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

"While the move has garnered the market's attention and stands out on a short-term basis, there does not appear to be any practical reasoning behind today's move other than what started as a short-term correction that gained momentum as dollar shorts started to cover their positions resulting in a short squeeze," wrote Robert Pavlik, chief market strategist banyan partners.

Early weakness in the dollar occured as Zhou Hai, division chief with the financial research department of the People's Bank of China, opined in Monday's Financial News, a paper published by the bank, that the dollar should remain the principal currency in China's stockpile of foreign exchange reserves, but the portion of the euro and yen should increase. He later told Reuters it was "purely my personal view."

Among the days movers, Microsoft ( MSFT) gained 2.4% after analysts at JPMorgan Chase raised their price target, following the software giant's earnings last week.

Verizon ( VZ) met earnings targets and reported a 10% increase in sales, but shares were down 0.7%.

Also, Corning ( GLW) topped estimates despite a 4.9% drop in sales, but shares lost 0.9%.

"The earnings season marches on and Wall Street is merely yawning," writes Paul Nolte, director of investments for Hinsdale Associates. "Save for the blowout from Amazon, earnings that are beating estimates are not being met with the huzzahs of prior quarters, although if a company misses, they are severely punished."

Stocks stuttered at the end of last week to close at very slight losses, "but not enough to really get us worried as equities have declined for a few weeks before rocketing back up more than a few times since the March lows," writes Nolte, adding that so far he's cautious, but not ready to sell.

"I have not really liked the tone of the equity markets for the past few weeks, but every time it looks like we are making a short-term top, a mysterious buyer shows up to rescue the day," agrees Jeff Saut, chief investment strategist at Raymond James. "That happened again last week when Tuesday's, and Wednesday's, downside 'two step' was reversed on Thursday."

In other news, Jose Botelho de Vasconcelos, Angola's oil minister and OPEC's president, said over the weekend that OPEC will raise output to protect the global economic recovery at a meeting in December if oil prices rise to $100 per barrel.

Elsewhere, Dutch financial services company ING ( ING) will move to separate its banking and insurance operations and plans to repurchase about 5 billion euros ($7.5 billion) of Core Tier 1 securities, or roughly half the aid it received from the Dutch state.

Economic data is light at the start of the week but will pick up with a report on home prices and another on consumer confidence on Tuesday.

Stocks overseas were mixed. In Europe, the FTSE in London and Dax in Frankfurt fell 1% and 1.7%, respectively. In Asia, Hong Kong's Hang Seng was closed for the session, while Japan's Nikkei added 0.8%.

-- Written by Elizabeth Trotta in New York.