NEW YORK (CNNMoney.com) - The stock rally hit a roadblock Thursday, as investors bailed out after a stellar start to 2006 that had boosted the major gauges to their highest levels in years.

The Dow Jones industrial average (down 81.08 to 10,962.36, Charts) sank about 0.7 percent. The blue-chip average abandoned 11,000, a key psychological level that it closed above Monday for the first time since 2001.

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The S&P 500 (down 8.12 to 1,286.06, Charts) index and the Nasdaq composite (down 14.67 to 2,316.69, Charts) both lost around 0.6 percent.

Treasury prices jumped, lowering the corresponding yields. The dollar climbed versus the euro and was barely moved versus the yen.

Crude oil prices were unchanged and gold declined.

The Dow and S&P 500 rose for six out of the first seven sessions of 2006 and began the day at more than 4-1/2 year highs. The Nasdaq gained for seven straight sessions and stood at a nearly 5-year high.

After such an advance, stocks were vulnerable to a pullback Thursday, particularly amid higher oil prices and the corporate news.

"We had a huge rally, we're tired and we need to consolidate," said Paul Rabbit, president of Rabbit Capital Management. "I think it's healthy."

However, Thursday's selloff doesn't necessarily mean the rally can't restart, Rabbit added, noting that there are few negatives out there other than the stock rally being a little ahead of itself.

January remains a seasonally strong time of year for stocks and after a little pullback, stocks may move higher again.

"We're at the point in the earnings period where we get all the bad news, because we're in the first two weeks of the new quarter," said John Forelli, portfolio manager at Independence Investments. "So I think there's a little anxiety about fourth-quarter earnings right now."

But as investors move into the heart of the earnings period, results should be pretty good and that should help relieve any concerns, he added.

As of 5:30 p.m. ET, Nasdaq and S&P futures point to a flat open for stocks, when fair value is taken into account.

Friday's focus will be on economic news. Reports are due before the open on retail sales, business inventories, and most notably, consumer prices.

General Motors (down $0.90 to $20.96, Research) was the Dow's biggest decliner, losing over 4 percent on renewed concerns about whether the troubled automaker will cut its dividend.

Dow component J.P. Morgan Chase (down $0.75 to $39.95, Research) lost 1.8 percent after Piper Jaffray downgraded it to "market perform" from "outperform," according to the Wall Street Journal.

Component Coca-Cola (down $0.23 to $41.44, Research) dipped after Goldman Sachs downgraded it to "in line" from "outperform," saying that 2006 won't be a stellar year for the company. The brokerage also cut its rating on Anheuser-Busch (down $0.70 to $42.41, Research).

A slew of other Dow stocks slipped as well, with 24 of 30 ending in the red.

Meanwhile, tech stocks came under pressure after a very strong start in the new year.

The influential chip sector tumbled, as evidenced by a decline for the Philadelphia Semiconductor (down 7.75 to 528.69, Charts) index, or the SOX.

Juniper Networks (down $0.51 to $21.62, Research) and Tellabs (down $0.39 to $11.22, Research) were among the issues weighing on the Amex Networking (down 3.60 to 250.98, Charts) index.

A slew of homebuilders slipped, dragging down the Dow Jones Home Construction (down $27.39 to $1,009.73, Research) index 2.6 percent.

On the upside, Federated Department Stores (up $1.32 to $72.95, Research) gained 1.8 percent on news that it is selling its Lord & Taylor chain.

In other news, Guidant (down $0.04 to $70.40, Research) said it accepted Johnson & Johnson (down $0.29 to $62.21, Research)'s improved $23 billion buyout offer, but has also left the door open for rival suitor Boston Scientific (down $0.36 to $25.05, Research), setting up a potential bidding war.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by seven to four on volume of 1.70 billion shares. On the Nasdaq, losers beat winners three to two on volume of 2.04 billion shares.

Adding to the day's declines: news that the Federal Reserve Bank of Philadelphia has downwardly revised its December reading of business conditions.

Investors also eyed the morning release of the November trade gap report, which fell more than expected due to a drop in oil prices.

A separate report showed a rise in the number of Americans filing new claims for unemployment last week, that was nonetheless short of expectations.

U.S. crude oil for February delivery ended unchanged at $63.94 a barrel on the New York Mercantile Exchange. Oil prices had risen throughout the session, backing off near the close.

Treasury prices rose, lowering the yield on the 10-year note to 4.40 percent from around 4.46 percent late Wednesday. Treasury bond yields and prices move in opposite directions.

The dollar rose versus the euro and was little changed versus the yen.

COMEX gold for February delivery fell 80 cents to settle at $550.10 an ounce.

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