US STOCKS-Recovery worries take toll on Wall St

* Oil prices slide more than 3 pct to near $64 a barrel

* U.S. service sector contracts at slower pace in June

* Dow off 0.7 pct, S&P off 0.9 pct, Nasdaq off 1.3 pct

* For up-to-the-minute market news click [STXNEWS/US] (Updates to late morning)

By Leah Schnurr

NEW YORK, July 6 (Reuters) - U.S. stocks fell on Monday as investors worried about the potential strength and timing of an economic recovery, sending oil prices and energy shares lower.

Data that showed the U.S. service sector contracted at a slower pace in June eased some of the jitters but was not enough to overcome last week's much worse-than-expected jobs report. For details, see [ID:nWEN0263]

Although unemployment is viewed as a lagging indicator that will likely worsen even as the economy starts to recover, analysts said the consumer spending that will be a linchpin of stabilization won't materialize if people are worried about losing their jobs.

"The economy is getting squeezed from both ends, so the worry is that the recovery is going to be much slower and much more erratic than most people felt," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.

Oil CLc1 touched a five-week low and fell to around $64 a barrel, sending Exxon Mobil Corp (XOM.N) down 2.1 percent at $67.07, and Chevron Corp (CVX.N) fell 2.3 percent to $62.92. The two companies were the biggest drags on the Dow Jones industrial average.

Although the weaker oil prices bode well for recession-weary consumers, strong commodity prices have been viewed as a signal the global economy is finding its footing.

The Dow Jones industrial average .DJI fell 54.87 points, or 0.66 percent, to 8,225.87. The Standard & Poor's 500 Index .SPX lost 7.83 points, or 0.87 percent, to 888.59. The Nasdaq Composite Index .IXIC gave up 23.16 points, or 1.29 percent, at 1,773.36.

The S&P 500 is up about 31 percent from March's 12-year low, following a rally spurred by bets the economy will show signs of recovery later in the year. The market run-up has stalled of late as investors have become cautious and taken some profits.

The focus is also on the start of earnings season, which kicks off with Alcoa Inc (AA.N) this week. Investors are hoping company outlooks will provide evidence the worst of the economic slump is past.

Bucking the trend, American Express Co (AXP.N) led the Dow risers, gaining 2 percent to $22.71 after Stifel Nicolaus upgraded the company, saying it was the least exposed to new rules on the credit card sector. (Editing by Padraic Cassidy)