U.S. stocks fell on Monday after McDonald's Corp warned that second-quarter profit may be hurt by currency swings and as investors worried that the ongoing rise in interest rates could hamper a recovery.

With the market rallying for three months, investors are increasingly looking for more concrete evidence of an improving economy to sustain the advance.

The Dow Jones industrial average <.DJI> dropped 123.41 points, or 1.41 percent, to 8,639.72. The Standard & Poor's 500 Index <.SPX> fell 12.79 points, or 1.36 percent, to 927.30. The Nasdaq Composite Index <.IXIC> slid 29.68 points, or 1.60 percent, to 1,819.74.

Clearly the recovery that the market is pricing in is not here yet ... (it) will have to materialize, otherwise the market is not going to be able to hold on to its gains, said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

In addition, a continued rise in bond yields could be another headwind for stocks since rising interest rates could boost borrowing costs for consumers and businesses.

The difference between long-dated and short-dated Treasuries has been widening in the past few weeks, and Kenny believes a continuation of that trend could be a bit of a shot across the bow for the equity markets.

In the last two days, the trend has reversed as short-term yields have risen on speculation the U.S. Federal Reserve may raise interest rates.

McDonald's shares were among the top drags on the Dow, falling 2.4 percent to $58.44, after the company warned that second-quarter profit could be reduced by 8 cents to 9 cents a share if foreign exchange rates remained around current levels.

Other drags were big manufacturers and natural resource companies that have had a strong run-up in recent weeks. Freeport-McMoRan Copper & Gold Inc fell 3.3 percent to $55.25, while 3M Co fell 3 percent to $59.18.

Meanwhile, the top drag on the Nasdaq was iPhone and Mac maker Apple Inc , along with other big-cap technology companies such as Google Inc and Microsoft Corp . They were all down about 2 percent or more.

(Reporting by Tenzin Pema; editing by Jeffrey Benkoe)