Stocks had advanced in early trading, but the gains weren't broad and were quickly lost. The jobs report Friday has rekindled nervousness in the market about housing and credit market weakness bleeding into the overall economy and squeezing consumer spending.

Wall Street dipped further Monday after San Francisco Fed President Janet Yellen said that while market turmoil has the potential to hurt the economy, rate policy should not bail out investors. The speech followed comments from Atlanta Fed President Dennis Lockhart, who said investors should consider Friday's unemployment report alongside a mostly strong batch of retail sales reports seen recently, and Philadelphia Fed President Charles Plosser, who said over the weekend that the Fed doesn't make rate decisions based on any one number.

For many investors, a rate cut after more than a year of the Fed standing pat on rates is inevitable. The debate, as they see it, is whether the Fed on Sept. 18 will reduce rates by a quarter percentage point or a half percentage point to loosen up the tight credit markets -- and also, if the central bank will continue to reduce rates as the year goes on.

There could be a major selloff if the Fed doesn't reduce rates next week, said Scott Fullman, director of investment strategy for I. A. Englander & Co. And until then, trading will be choppy. "It's very volatile here, but we're not seeing a tremendous amount of volume. People are on the sidelines. I think people want to be convinced of what's happening before they get back in," Fullman said.

The Dow Jones industrial average dropped 49.34, or 0.38 percent, to 13,064.04 after falling 250 points on Friday.

Broader stock indexes also fell. The Standard & Poor's 500 index lost 9.18, or 0.63 percent, falling to 1,444.37, and the Nasdaq composite index declined 16.27, or 0.63 percent, to 2,549.43.

Bond prices jumped as stocks slipped, pushing the yield on the benchmark 10-year Treasury note down to 4.31 percent from 4.37 percent late Friday.

The dollar slipped against most other major currencies, while gold prices, which have risen sharply in recent weeks amid concerns about the strength of the U.S. dollar, rose to fresh multiyear highs. A rate cut by the Fed could hurt dollar-denominated assets, prompting some investors to shift into gold.

The stock market's slide began Friday after the Labor Department reported the first monthly decline in payrolls in four years -- further depressing a market already uneasy about a lackluster housing market, tightening availability of credit and a rise in mortgage defaults.

While some investors had hoped for weak data to help the Fed justify cutting interest rates when it meets next week, the market was shocked by a loss in jobs when a gain had been expected. The drop in payrolls stirred concerns of a recession. With consumer spending accounting for about two-thirds of economic activity, Wall Street is concerned about any loss in employment that would make consumers hesitant to spend.

Because of Friday's retrenchment, the three major indexes all lost more than 1 percent for the week.

And on Monday, the market absorbed more news of fallout from mortgage failures. Countrywide Financial Corp. said after the closing bell Friday it would cut as many as 12,000 jobs -- up to 20 percent of it work force -- as the mortgage lender tries to ride out upheaval in the mortgage industry. The company expects new mortgages to fall 25 percent next year.

Countrywide fell 99 cents, or 5.4 percent, to $17.22.

Energy company shares fell alongside oil prices. Light, sweet crude fell 67 cents to $76.03 a barrel on the New York Mercantile Exchange. Exxon Mobil Corp. was down $1.60 at $84.15.

Some technology stocks were strong, though.

Intel Corp. rose 25 cents to $25.72 after raising its sales outlook, and Advanced Micro Devices Inc. rose 15 cents to $12.75 after releasing its newest microprocessor. Also, Apple Inc. rose $3.43, or 2.7 percent, to $135.20 after selling its 1 millionth iPhone on Sunday.

The Russell 2000 index of smaller companies was down 11.72, or 1.51 percent, at 764.07.

Overseas, Japan's Nikkei stock average fell 2.22 percent. In afternoon trading, Britain's FTSE 100 was down 0.92 percent, Germany's DAX index was down 0.82 percent, and France's CAC-40 was down 0.80 percent.

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