Stocks fell on Monday but pulled off their lows by mid-session, suggesting the market is shrugging off the weaker-than-expected jobs data that pushed major indexes down more than 1 percent earlier.

The S&P 500 slid to its lowest point in more than three weeks, but recovered some of that lost ground in afternoon trade and held well above its 50-day moving average near 1,371.

We have reacted to the weak unemployment numbers, and now we are shifting focus to earnings, especially the banks later in the week, said Paul Nolte, managing director of Dearborn Partners in Chicago.

U.S. non-farm payrolls added 120,000 jobs in March, far below the forecast gain of 203,000 jobs, Labor Department data released on Friday showed. The U.S. unemployment rate slipped to 8.2 percent in March from February's 8.3 percent.

The payrolls report cast doubts on the United States' ability to help bolster the global economy as Europe's debt crisis resurfaces and worries remain whether China's economy will avoid a hard landing. But at the same time, it renewed hopes for more monetary stimulus from the Federal Reserve.

China's surprisingly soft producer prices data sparked concerns about waning demand in the world's second-largest economy. The country's March PPI data reinforced expectations that a cooling economy has eclipsed inflation as the Chinese government's biggest near-term worry.

The Dow Jones industrial average <.DJI> was down 99.56 points, or 0.76 percent, at 12,962.59. The Standard & Poor's 500 Index <.SPX> was down 13.51 points, or 0.97 percent, at 1,384.57. The Nasdaq Composite Index <.IXIC> was down 26.66 points, or 0.87 percent, at 3,053.84.

The S&P 500 touched an intraday low at 1,378.24.

Following last week's modest losses, the S&P 500's key near-term support levels were 1,375 to 1,380, which were its resistance levels in late February, said Scott Davies, an analyst at Brown Brothers Harriman & Co in New York.

Banks' and industrials' shares led the S&P 500's decline, with the S&P financial sector index <.GSPF> and the S&P industrial sector index <.GSPI> each down 1.5 percent.

U.S. equities have rallied sharply in recent months, with the S&P 500 climbing nearly 30 percent from its early October closing low to end a week ago at nearly a four-year high . The market has stalled in the last few weeks as investors have questioned how quickly the gains have come 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 scheduled to report results. Alcoa will be the first Dow component to report results, with earnings due after Tuesday's closing bell.

AOL shares touched a lifetime high of $27.47 earlier in the session and then eased slightly to $27.18 - a jump of nearly 48 percent - after the Internet company said it would sell more than 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 24.6 percent to $26.40 after the health insurer said its Medicaid contract in Ohio will not be renewed.

(Editing by Jan Paschal)

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