The Dow Jones Industrial Average fell 89.28 points, or 0.29%, to 31,008.69, the S&P 500 lost 25.07 points, or 0.66%, to 3,799.61 and the Nasdaq Composite dropped 165.54 points, or 1.25%, to 13,036.43.
The pan-European STOXX 600 index lost 0.67%.
With Asian stock markets also lower, MSCI's gauge of stocks across the globe shed 0.77% after closing at a record high on Friday.
Longer-term Treasury yields were at their highest since March before new long-dated supply coming this week and on speculation of more U.S. fiscal stimulus as Democrats will have control of Congress and the White House.
Expectations of a multitrillion-dollar stimulus plan and the belief the Federal Reserve will not act to counter rising interest rates, along with new Treasury supply are helping yields rise, said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
Benchmark 10-year notes last fell 11/32 in price to yield 1.1443%, from 1.107% late on Friday.
The spread between the 2-year and 10-year Treasury yield brushed against 100 basis points to hit its steepest since July 2017.
The climb in yields in turn offered some support to the dollar, which rose to its highest in over two weeks against a basket of currencies.
"While the USD may catch a bid on position-adjustment or profit-taking after its recent weakness, a sustained recovery will have to be accompanied by either a clear improvement in recent yield trends or a positive U.S. growth shock," said Shaun Osborne, chief currency strategist at Scotiabank.
The dollar index rose 0.256%, with the euro down 0.54% to $1.2152.
Morgan Stanley said it had moved to neutral from bullish on emerging market currencies as its forecasts had been hit and factors that kept the U.S. dollar on the back foot may not be sustained.
The Japanese yen weakened 0.24% versus the greenback at 104.20 per dollar, while Sterling was last trading at $1.3516, down 0.35% on the day.
Crude oil prices fell, hit by renewed concerns about global fuel demand amid tough coronavirus lockdowns across the globe, as well as the stronger dollar.
"The renewed concerns about demand due to very high numbers of new (COVID-19) cases and further mobility restrictions, plus the stronger U.S. dollar, are generating selling pressure," Commerzbank analyst Eugen Weinberg said.
U.S. crude recently fell 0.1% to $52.19 per barrel and Brent was at $55.61, down 0.68% on the day.
Spot gold dropped 0.2% to $1,844.27 an ounce. Silver fell 1.70% to $24.94.
Bitcoin last fell 9.98% to $34,362.43. At its session low, the cryptocurrency fell 21% on Monday.
(Reporting by Rodrigo Campos; additional reporting by Medha Singh and Devik Jain in Bengaluru, Stephanie Kelly, Saqib Iqbal Ahmed, Karen Brettell and Herbert Lash in New York; editing by Nick Zieminski and Lisa Shumaker) ((firstname.lastname@example.org;; +1 (332) 219-1131;; Reuters Messaging: http://www.twitter.com/rodrigocampos))