Leave it to the economy to stop a debt-deal rally.

The Dow Jones industrial average started the day up nearly 140 points after President Barack Obama and congressional leaders said Sunday that a deal had been reached to raise the nation's borrowing limit and avoid a possible debt default. The House of Representatives approved the bill Monday evening after the markets closed.

But another sign that the economy has slowed erased those early gains and took the Dow down as many as 145 points by midday.

The Dow ended the day with a loss of 10.75 points. It was the seventh day of declines for the blue-chip index.

Many investors remained concerned about the direction of the economy. A report from the Institute of Supply Management said that U.S. manufacturing barely grew last month. And on Friday, the government said that so far this year the economy has grown at its slowest pace since the recession ended in June 2009.

The manufacturing index was the first major economic report released in July. Analysts had expected it to show that the economy was expanding.

"This was a shock to the market," said Phil Orlando, chief strategist at Federated Investors. "It clearly offset the emotional strength that we saw in the open from this tentative budget compromise."

Federal Reserve Chairman Ben Bernanke and many economists have said that the U.S. economy would gain momentum in the second half of the year. But the manufacturing report, sluggish overall growth and concern about spending cuts included in the debt deal have cast doubt on that prediction.

The Dow fell 0.1 percent, to 12,132.49. The broader Standard and Poor's 500 index lost 5.34, or 0.4 percent, to 1,286.94. The Nasdaq composite fell 11.77, or 0.4 percent, to 2,744.61.

The S&P index traded below its 200-day moving average of 1,280. Many traders use moving averages as benchmarks for when to buy and sell. Orlando said the S&P could fall to 1,250 or lower over the next few days as investors begin to doubt the strength of the economy.

Health care stocks fell nearly 2 percent, the most of the 10 company groups in the S&P 500 index. United HealthGroup Inc., Aetna Inc., and St. Jude Medical Inc. fell more than 2.5 percent after the government said it plans to cut Medicare reimbursement rates 11 percent. The cuts are unrelated to the debt deal.

Bond yields fell to the lowest level of the year as investors moved into safer assets. The yield on the 10-year Treasury note fell to 2.75 percent from 2.80 percent late Friday.

The manufacturing report led to a worldwide pullback from riskier assets. The Euro Stoxx 50, an index that tracks blue chip companies in countries that use the euro, fell nearly 3 percent. Oil futures dropped 1 percent to just below $95 a barrel. And gold made up its early losses to remain near $1,625 an ounce.

The latest signs of weakness in the U.S. economy also pushed the dollar lower against the Japanese yen and the Swiss franc, two currencies that traders see as relatively safe bets. The dollar touched another record low against the franc, and reached a post-World War II low against the yen.

Before the ISM report was released, stocks rose sharply largely because President Obama and Congressional leaders announced Sunday that they had agreed on a deal to raise the nation's borrowing limit ahead of Tuesday's deadline. Investors have been worried that the U.S. might default if a deal wasn't reached. The federal government would be unable to pay all of its bills after Tuesday if a law is not signed. Among them: interest payments on Treasury bonds, salaries of federal employees and Social Security checks to retirees.

The debt agreement would raise the U.S. debt limit by $2.1 trillion. It would also cut at more than $2 trillion in federal spending over 10 years. Under the bill, a new joint committee of Congress would recommend deficit reductions by the end of November that would be put to a vote by Congress by year's end.

The Senate is likely to vote on the bill Tuesday. President Obama has said he will sign it if it wins approval.

Many important details about spending cuts and possible tax increases were to be decided by the new committee, which means it could be months before there's clarity on how the deficit will be reduced.

"The debt agreement was a step in the right direction but probably a small step," said Bob Gelfond, the head of MQS Asset Management, a hedge fund based in New York City.

Others remained concerned that the bill would not cut the deficit enough to prevent a downgrade to the U.S. government's top credit rating. Credit rating agencies Standard and Poor's and Moody's declined to comment about the bill's possible impact on their decision-making process.

"This agreement didn't resolve any of the fundamental differences in the direction of spending and revenues that would address our long-term issues," said Kate Warne, the investment strategist at Edward Jones.

Rising and failing shares were roughly even on the New York Stock Exchange. Volume was higher than average at 4.4 billion shares.