Major stock indexes fell more than 1 percent in early trading on Monday, weighed by growth-related sectors, after last week's much weaker-than-expected report on March U.S. job creation.

The S&P 500, down four sessions running, hit a more than three-week low but was expected to hold above its 50-day average, now near 1,371. The Dow industrials dipped below its 50-day average for the first time since December 20.

Technical indicators in major indexes were softening last week and the jobs report was an excuse to take the S&P near support levels, according to Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

One percent down is not grim, he said. It's a very orderly correction.

U.S. non-farm payrolls grew by 120,000 last month, far below the forecast gain of 203,000 jobs. The unemployment rate dipped to 8.2 percent, down from 8.3 percent in February.

The report casts doubt over the ability of the United States to help boost the global economy as Europe's debt crisis resurfaces and worries remain whether China's economy will avoid a hard landing.

Surprisingly soft producer prices data in China sparked concerns of waning demand, reinforcing expectations that a cooling economy has eclipsed inflation as the Chinese government's biggest near-term worry.

A lack of major U.S. economic data on Monday will keep investors focused on Friday's payrolls report, which came in on an equity market holiday.

Bank shares led declines on the S&P 500, alongside the industrials sector. The S&P financial sector index <.GSPF> fell 2 percent while industrials <.GSPI> lost 1.6 percent.

The Dow Jones industrial average <.DJI> fell 138.46 points, or 1.06 percent, to 12,921.68. The Standard & Poor's 500 Index <.SPX> dropped 17.77 points, or 1.27 percent, to 1,380.31. The Nasdaq Composite <.IXIC> lost 43.42 points, or 1.41 percent, to 3,037.08.

The S&P and Dow fell for a fourth straight session, while the Nasdaq was down for the third day in four.

U.S. equities have rallied sharply in recent months, gaining nearly 30 percent since early October to push the S&P 500 near four-year highs. The market has stalled in the last few weeks as investors question the swiftness of the gains and whether economic data is strong enough to warrant higher stock prices.

Earnings will come to the fore this week, with bellwethers Google Inc and JPMorgan Chase & Co expected to report results. Alcoa will on Tuesday be the first Dow component to report.

AOL shares jumped 43.5 percent to $26.44 after the Internet company said it would sell over 800 of its patents and related applications to Microsoft , and grant Microsoft a non-exclusive license to patents it retains for slightly over $1 billion in cash.

Molina Healthcare Inc shares plunged 24.5 percent to $24.43 after the health insurer said its Medicaid contract in Ohio will not be renewed.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)

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