NEW YORK — Wall Street slipped lower yesterday, closing out a year that will be remembered for the stock market's great comeback — a year-end rally that pushed the Dow Jones industrials past 12,000 for the first time.

By all accounts, 2006 ended up a very good year for stocks as bullish investors bounced back from a slumping housing market and the Federal Reserve's two-year campaign of interest rate hikes. The markets approached record levels in the spring, pulled back sharply in the summer, but found a clear direction in the fall to send the major indexes to multi-year highs.

Blue chips were the standouts of 2006. The Dow Jones industrial average, the index of 30 of the nation's biggest companies, hit record levels dozens of times since achieving its first close above 12,000 on Oct. 19; it traded as high as 12,529.87 before dipping to its close for the year.

This was the best year for the stock market since 2003, when Wall Street staged a massive recovery from levels sideswiped by a bear market. But 2006 will really be remembered for the market's soaring to heights not seen since the height of the dot-com era — this time, however, Wall Street advanced cautiously, not recklessly.

The rally was fed by investors' growing belief that the economy has withstood well the Fed's rate hikes and the impact of record-high oil prices. And some analysts expect the advance to continue.

"The stock market is correct in its judgment that we are probably only in the fifth or sixth inning of the game, and that this (economic) expansion may even go into extra innings," said Stuart Schweitzer, global markets strategist for JPMorgan Asset & Wealth Management. "This was a barn-burner of a year, and I expect reasonably solid results over the course of 2007."

Yesterday, the Dow fell 38.37, or 0.31 percent, to 12,463.15.

The major indexes posted healthy gains for the year, with the Dow Jones industrials rising 16.29 percent, the S&P 500 adding 13.62 percent and the Nasdaq up 9.52 percent. That's the best showing since 2003, when the Dow closed up 25.3 percent, the Nasdaq rose 50 percent and the S&P 500 gained 26.4 percent — but those gains were the beginning of the market's recovery from the trough of three straight losing years.

It wasn't just the stock markets that made significant gains in 2006. The bond market moved in lockstep with stocks — a rare event on Wall Street.

This year was also a bit of a rule bender for Treasuries. Yields on long-term Treasury notes and bonds were lower than for short-term Treasury bills. Junk bonds were in such demand that their yields were almost on parity with those of investment-grade bonds.

Bonds slipped further in yesterday's session, with the yield on the benchmark 10-year Treasury rising to 4.71 percent from 4.69 percent on Thursday.

Stocks are expected to rise further in the new year, but not without some resistance. A big question still hanging over the market is whether the Fed will feel comfortable enough with the balance between inflation and a moderating economy to start lowering interest rates. If inflation seems to be accelerating, an interest rate hike could still be in the offing.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 1.66 billion shares, compared with 1.67 billion on Thursday.