The Dow Jones industrial average fell about 10 points in late afternoon trading after jumping nearly 172 the first hour of the day. Treasury prices rose as investors remained concerned about the economy.
Retail stocks logged some of the biggest drops ahead of reports later in the week on June sales. Investors are concerned that a weakening of the recovery will keep cautious consumers out of stores. Macy's Inc. fell 3.6 percent, while Nordstrom Inc. lost 1.9 percent.
Investors tried in early trading to recover some of the big losses that piled up in the past two weeks following disappointing economic reports. Traders initially shook off a midmorning report that growth in services businesses slowed last month. The Institute for Supply Management, a trade group of purchasing executives, said its services index fell to 53.8 from 55.4 in May. Economists polled by Thomson Reuters forecast 55.0. A reading above 50 indicates growth.
The weaker showing wasn't a surprise to investors who have been seeing lackluster economic numbers pound stocks. The Dow has dropped 7.3 percent in the past two weeks and on Friday closed at its lowest level since early October. The index is down 13.6 percent from its 2010 high of 11,205 in late April. The drop led some institutional buyers to hunt for beaten-down stocks in early trading.
"There are pockets of opportunity out there. There are some areas with good valuations," said Aaron Reynolds, senior portfolio analyst at Robert W. Baird in Milwaukee. He warned that uncertainty about the direction of the economy would lead to choppy trading.
Analysts also said that there weren't any major headlines to ease the worries about the economy. That left the market's early climb susceptible to a reversal.
Brian Dolan, chief currency strategist at Forex.com, in Bedminster, N.J., noted that prices in the Treasury market remained higher. That signals that worries about the economy remain.
"We've obviously ratcheted down the outlook and now it's a question of how much further," Dolan said, referring to the economy. "From here I would expect to see further weakness."
In the final hour of trading, the Dow fell 10.90, or 0.1 percent, to 9,675.81. The broader Standard & Poor's 500 index fell 2.19, or 0.2 percent, to 1,020.39, and the Nasdaq composite index fell 9.70, or 0.5 percent, to 2,082.09.
Stocks fell on Friday, the last trading day before the Independence Day holiday, after a report found that employers didn't ramp up hiring as much as economists had forecast. It was the second straight month hiring by private employers failed to meet expectations.
Meanwhile, bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.93 percent from 2.98 percent late Friday.
Crude oil fell 8 cents to $72.06 per barrel on the New York Mercantile Exchange. Gold fell.
Macy's fell 64 cents, or 3.6 percent, to $17.21, while Nordstrom fell 61 cents, or 1.9 percent, to $31.56.
Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 886 million shares, compared with 760 million traded at the same point Friday.
The Russell 2000 index of smaller companies fell 10.06, or 1.7 percent, to 588.91.
Overseas markets rose after investors found stock prices more attractive and Australia's central bank issued an upbeat forecast for the country's economy. Britain's FTSE 100 rose 2.9 percent, Germany's DAX index gained 2.2 percent, and France's CAC-40 jumped 2.7 percent. Japan's Nikkei stock average rose 0.8 percent.