* Payrolls increase but wages fall
* Crude prices fall to April 2009 lows
* Bed, Bath & Beyond stumbles after results, outlook
* Indexes off: Dow 0.7 pct, S&P 0.7 pct, Nasdaq 0.5 pct (Updates to afternoon, changes byline)
By Caroline Valetkevitch
NEW YORK, Jan 9 (Reuters) - U.S. stocks fell in Friday afternoon trading after of a two-day rally as investors assessed a monthly payrolls report that gave mixed signals on the economy and energy stocks fell alongside another drop in crude prices.
Nonfarm payrolls rose in December, topping Wall Street expectations while November's surprising gain was also revised higher. However, wages declined.
"I don't necessarily think the wage decline is such a big deal but what it does tell you is that there is certainly no upward pressure on wages and so therefore it just signals that slack in the labor market," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
The S&P energy sector led declines, down 1.1 percent. Global oil prices resumed their slide on Friday after two days of relative calm, with Brent and U.S. crude hitting their lowest level since April 2009 on persistent worry over the global supply glut.
At 1:14 p.m., the Dow Jones industrial average fell 132.23 points, or 0.74 percent, to 17,775.64, the S&P 500 lost 13.62 points, or 0.66 percent, to 2,048.52 and the Nasdaq Composite dropped 23.79 points, or 0.5 percent, to 4,712.39.
Data separately showed wholesale inventories rose in November, also topping expectations and suggesting restocking may boost fourth-quarter growth.
The S&P 500 had added 3 percent in the previous two sessions, retracing a good portion of a 4.2 percent loss in the previous five trading days, on expectations the U.S. economy will continue to accelerate and hopes the European Central Bank will take more aggressive stimulus action in coming weeks.
Despite the two-day rally, the Dow, S&P 500 and Nasdaq were on track to end the week lower.
A number of retail shares fell after reporting December sales and providing profit forecasts.
Bed, Bath & Beyond dropped 7.8 percent to $73.24 as the worst-performing S&P 500 component after the retailer forecast fourth-quarter earnings at the low end of expectations.
Declining issues outnumbered advancing ones on the NYSE 1,951 to 1,015, for a 1.92-to-1 ratio; on the Nasdaq, 1,677 issues fell and 968 advanced for a 1.73-to-1 ratio. (Editing by Bernadette Baum and Nick Zieminski)