The Dow Jones industrial average (INDU) fell 20 points, or 0.2%, to close at 11,103. The S&P 500 (SPX) lost 9 points, or 0.8%, to 1,155. The tech-heavy Nasdaq composite (COMP) dropped 27 points, or 1.1%, 2,479.
On Friday, stocks opened higher after the U.S. government said employers added 103,000 jobs in September, much more than expected.
But concerns about the debt crisis in Europe were thrust back into the spotlight after Fitch cut its credit ratings for Italy and Spain.
Fitch downgraded Italy's long-term default rating one notch to A+, saying the intensifying eurozone debt crisis "constitutes a significant financial and economic shock which has weakened Italy's sovereign risk profile."
The ratings agency also cut is default rating for Spain two notches to AA+. Fitch said the downgrade reflects Spain's fiscal position and dim economic outlook, as well as the broader debt crisis.
The outlook for both nations is negative, said Fitch.
In addition, Moody's downgraded 12 U.K. financial institutions Friday, warning that some smaller banks may be allowed to fail.
"This continues to be a headline-by-headline driven market," said Larson.
The employment report provided "some reason to be cautiously optimistic," he said, adding that "the selling accelerated after the headlines from Fitch."
The dollar weakened against the euro and the British pound, but gained versus the Japanese yen.
Oil for November delivery gained 39 cents to $82.98 a barrel.
Gold futures for December delivery fell $17.40 to $1,635.80 an ounce.
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