Stocks fell more than 1 percent on Monday after a much weaker-than-expected report on March U.S. job creation last week.

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.

Obviously we had four good months and then this one weak month so we can't call this a trend. I think this would be a one-day reaction, said Ryan Detrick, senior strategist at Schaeffer's Investment Research in Cincinanati, Ohio. Now people are thinking, 'so the payrolls were weak, but let's see how earnings (season) will turn out'.

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 cast doubts on 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.

The Dow Jones industrial average <.DJI> was down 143.76 points, or 1.10 percent, at 12,916.38. The Standard & Poor's 500 Index <.SPX> was down 17.42 points, or 1.25 percent, at 1,380.66. The Nasdaq Composite Index <.IXIC> was down 33.63 points, or 1.09 percent, at 3,046.87.

Following last week's modest losses, key near-term support levels for the S&P 500 this week were 1375-1380 which were the levels of resistance for the index in late-February, said Scott Davies, analyst at Brothers Harriman & Co in New York.

Bank shares led declines on the S&P 500, alongside the industrials sector. The S&P financial sector index <.GSPF> fell 2.1 percent while industrials <.GSPI> lost 1.8 percent.

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 42.5 percent to $26.25 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 percent to $26.55 after the health insurer said its Medicaid contract in Ohio will not be renewed.

(Reporting By Angela Moon; Editing by Andrew Hay)

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