* Wall St extends pullback after worst week of the year
* Earnings, economic worries offset monetary stimulus
* Lufkin stock jumps almost 38 pct on GE's plan to buy company
* Dow off 0.3 pct; S&P 500 off 0.01 pct; Nasdaq down 0.1 pct
By Angela Moon
NEW YORK, April 8 (Reuters) - U.S. stocks declined modestly on Monday as investors faced the prospect of a lackluster earnings season and an economy that could be hitting a slow patch.
Tepid earnings could give investors a reason to sell some equities and push both the Dow and the S&P 500 back from their recent record highs.
The early pullback extended Friday's decline that had pushed the S&P 500 into its worst weekly percentage loss for the year. Defensive shares led Monday's downside move, including the S&P telecommunications sector index, off 0.7 percent.
Financial stocks also fell, extending last week's slide. Goldman Sachs shares lost 1.2 percent to $142. Wells Fargo & Co shares also dropped 1.2 percent - to $36.69.
Earnings forecasts have been scaled back, heading into first-quarter reports. S&P 500 companies' earnings are expected to have risen just 1.6 percent from a year ago, according to Thomson Reuters data, down from a forecast in January calling for a gain of 4.3 percent.
Stocks have rallied strongly this year with major indexes hitting record highs, helped in part by the Federal Reserve's stimulus program. The S&P 500 is up nearly 9 percent for the year so far, while the Dow has gained just under 11 percent.
The S&P 500 "had its worst week of the year. Still, it would be premature to conclude that the party is over," said Jerry Webman, chief economist at OppenheimerFunds, in New York.
"The index remains reasonably valued by a range of metrics. Constituents' earnings and sales multiples are still lower than they were at either of the last two market peaks, and cash on companies' balance sheets is higher."
A worse-than-expected jobs report on Friday added to fears that the pace of economic growth could be softening after generally upbeat data at the start of the year.
But loose monetary policy from central banks around the world still makes equities attractive to investors, and pullbacks could be used as buying opportunities, analysts said.
The Bank of Japan started its bond purchases on Monday after it announced last week it will inject about $1.4 trillion into the economy in less than two years.
Fed Chairman Ben Bernanke will give a speech later on Monday after markets are closed. Investors have been watching for any insight into the Fed's thinking on how long the central bank will keep its asset purchase program in place as it tries to boost the economic recovery.
The Dow Jones industrial average was down 37.64 points, or 0.26 percent, at 14,527.61. The Standard & Poor's 500 Index inched down just 0.11 of a point, or 0.01 percent, to 1,553.18. The Nasdaq Composite Index was down 2.43 points, or 0.08 percent, at 3,201.43.
"At this point, having pulled back from its new high, the S&P 500 is likely to find resistance again around the old record high of 1,565 in the near term, but any subsequent weakness would likely find some support near 1,546," said Randy Frederick, managing director of active trading and derivatives at Charles Schwab in Austin, Texas.
General Electric Co said it will buy oilfield pump maker Lufkin Industries Inc for about $2.98 billion, driving Lufkin shares up nearly 38 percent to $87.97. GE, a Dow component, declined 0.2 percent to $22.88.
Among blue-chip stocks, Johnson & Johnson Inc was the Dow's biggest percentage decliner after JPMorgan downgraded the healthcare company's stock to "neutral" from "overweight," saying Johnson & Johnson was facing "a messy first quarter and a likely downward revision to 2013 guidance." The stock fell 1.7 percent to $80.68.
Among technology stocks, HP shares shed 1 percent to $21.74. Google Inc slid 1.7 percent to $769.99.