The S&P 500 hit a more than two-month low on Monday as U.S. stocks extended a five-week decline on signs of a slowing economy.

Banks were among the hardest-hit sectors, with the S&P financial sector index <.GSPF> down 1 percent.

This seems like a continuation of sentiment from last week, where investors are coming to the realization that the economy is not growing as strongly as once anticipated, said Wasif Latif, vice president of equity investments at USAA Investment Management in San Antonio, Texas.

The weak economic data throughout last week corroborated those suspicions and because of that you are seeing the continuation (of the equities slide).

Friday's much weaker-than-expected jobs report -- a paltry 54,000 jobs were added last month, and the jobless rate climbed to 9.1 percent -- was the latest disappointing economic news to hit sentiment.

With second-quarter earnings season more than a month away, the market continued to focus on the uncertain economic outlook.

The Dow Jones industrial average <.DJI> shed 9.08 points, or 0.07 percent, to 12,142.18. The Standard & Poor's 500 Index <.SPX> dropped 3.79 points, or 0.29 percent, to 1,296.37. The Nasdaq Composite Index <.IXIC> slipped 0.43 point, or 0.02 percent, to 2,732.35.

The broad-based S&P 500 hit its lowest level since March 23, when it hit 1,284.05. It could close below 1,300 for the first time since late March. The index is down more than 5 percent from its May high.

Given that this particular economic predicament we are in is tied to housing, and there's continued pressure on housing and consumption, there's still uncertainty from a market standpoint on how banks will be able to maintain their recovery of the last 12 to 18 months, Latif said.

Shares of Bank Of America Corp slid 2.4 percent and Citigroup Inc tumbled 3 percent, while JPMorgan Chase & Co took off 1.2 percent and Wells Fargo & Co was off 1 percent.

In a sign the weak economy was threatening earnings, JP Morgan cut its rating on home improvement chain Lowes Cos Inc to neutral from overweight, citing softening home prices and stagnant job growth. The shares fell 0.9 percent to $23.19.

In one potential bright spot for investors, Apple Inc Chief Executive Steve Jobs is expected to take the wraps off the iCloud, a Web-based service that lets consumers stream music they bought to any Apple device. Apple rose 0.4 percent to $344.85.

An exchange-traded fund that tracks Peruvian stocks tumbled after left-wing former army commander Ollanta Humala won the nation's presidential election and vowed that the poor will share in the country's new wealth, scaring wealthy investors.

The iShares MSCI All Peru Capped Index Fund fell nearly 10 percent to $39.27, while U.S.-traded shares of miner CompaƱia de Minas Buenaventura dropped 10 percent to $37.88.

(Reporting by Rodrigo Campos; editing by Jeffrey Benkoe)