By Dan Strumpf And Saumya Vaishampayan 

U.S. stocks shed their early gains but bond prices remained higher as the latest U.S. jobs report reaffirmed investors' belief that the Federal Reserve would be patient in raising interest rates.

The Dow Jones Industrial Average slipped 23 points, or 0.2%, to 17734 in late morning trading, reversing a gain of as much as 68 points earlier in the session. The S&P 500 index lost two points, or 0.1%, to 2075. The Nasdaq Composite Index declined 12 points, or 0.3% to 5000.

The yield on 10-year U.S. Treasury bonds fell to 2.371% from 2.47% before the jobs report. Bond yields fall as prices rise.

The Labor Department said 223,000 jobs were added to the U.S. economy in June, while the unemployment rate fell to 5.3% from 5.5%. The number of new jobs created came in just below expectations for 233,000, while wages remained flat and job creation in the spring was weaker than initially estimated, the Labor Department said.

Still, the report marks the 14th out of the last 16 months in which the economy added more than 200,000 jobs. Investors closely track the monthly jobs report, which is also taken into consideration by the Federal Reserve as it determines its course on higher interest rates.

"It's a solid report, not overly strong but exactly what the Fed will need to continue to justify the case for liftoff later this year," said Darrell Cronk, president of Wells Fargo Investment Institute. More important, it supports the idea that the economy isn't expanding at a pace that would prompt the Fed to raise rates swiftly, he added.

Still, some investors remained uneasy bidding up stocks ahead of the long July Fourth weekend in the U.S., particularly given the looking Sunday referendum in Greece over the country's bailout terms, traders said. Trading activity was light.

"It's not a surprise that we did not keep the earlier gains, especially with the uncertainty over the weekend," said Mark Kepner, managing director of sales and trading at brokerage Themis Trading. "I would be surprised if we had any meaningful rally today."

Ultralow U.S. interest rates have helped to underpin a rally in stocks and bonds since the 2008 financial crisis, and some investors have been concerned about what a rate increase would mean for financial markets. Citing improvement in the U.S. economy and labor market, the Fed has signaled that it could raise rates as soon as this year, with many economists pegging September for the so-called liftoff.

While the number of jobs created in June fell slightly short of expectations, the level indicated that the U.S. economy continued to expand steadily last month. However, wage growth came in weaker than expected, calling the timing of any interest-rate increase into question. Fed officials have said they want to see inflation, which is driven partly by wage growth, move higher before raising rates.

"You had the surprise in the wage inflation, which cast some doubt over a rate increase in September," said Zhiwei Ren, managing director and portfolio manager at Penn Mutual Asset Management Inc., which has $20 billion assets under management.

Fed-funds futures, used to place bets on central bank policy, showed Thursday that investors and traders see a 10% likelihood of a rate increase at the September meeting, compared with 17% before the jobs report, according to CME Group.

The odds for a rate increase at the December meeting were 49%, compared with 59% before the data.

But Mr. Ren said he remains positioned for higher bond yields. "This report is a one-off and inconsistent with other reports on a stronger economy," he said. " This doesn't change the big picture of the U.S. economy."

Meanwhile, the dollar weakened against the euro and the yen. The greenback fell against the Japanese currency to Yen123.15, from Yen123.68 before the jobs data were released, now trading flat for the day. The dollar declined against the common currency, with one euro buying $1.1089, from $1.1056 ahead of the numbers. The euro is 0.3% higher against the dollar for the session.

"The initial reaction of the dollar to a slightly weaker report was appropriate," said Elsa Lignos, senior currency strategist at RBC Capital Markets. "But the report likely wasn't view-changing for people's expectations on the Fed or the U.S. economy. A September rate increase was already the minority view."

The jobs report drew investors' attention back to the U.S. on Thursday. For weeks, major stock benchmarks have been whipsawed by news out of Greece, which failed to make its debt payment to the International Monetary Fund on Tuesday. Greece's ruling party continued to say it was offering new comprises to its creditors and was urging a "no" vote in Sunday's referendum.

With Thursday's gains, the S&P 500 is up 1.1% for the year, while the Dow remains 0.2% lower.

"For the market, [the jobs data] is probably positive because it pushes back your expectation of Fed hikes," said Daniel Morris,global investment strategist at TIAA-CREF Asset Management, which oversees $866 billion. "I'm probably still leaning toward September but probably less confidently than before."

European stocks deepened their losses ahead of this weekend's vote in Greece. Germany's DAX lost 0.7% and France's CAC-40 fell 1%.

Chinese markets tumbled Thursday despite Beijing's attempts to relax rules. The Shanghai Composite closed down 3.5% while the smaller Shenzhen market was down 5.6%.

In commodity markets, gold futures lost 0.8% to $1159.80 an ounce. Crude-oil futures added 0.2% to $57.06 a barrel

Meanwhile, shares of

Tesla Motors Inc. rose 2% after the electric car maker said it delivered 11,507 Model S sedans in the second quarter of the year, a 52% increase of the prior-year period and a company record.

Min Zeng contributed to this article.

Write to Dan Strumpf at daniel.strumpf@wsj.com and Saumya Vaishampayan at saumya.vaishampayan@wsj.com