Stocks were down on Thursday alongside weak global markets as the U.S. dollar strengthened after the government reported a slight increase in initial jobless claims.

According to the Labor Department, initial jobless claims rose from last week, but less than forecast.

The data did little to move equities ahead of the closely watched monthly non-farm payrolls report on Friday. Economists look for a loss of 8,000 non-farm jobs after a surprisingly small total of 11,000 job losses in November.

We are continuing to see consolidation after the huge rally on Monday that caught people by surprise ... and with the big unemployment data out tomorrow, we are seeing a lot of hesitance, a lot of people staying on the sidelines, said Paul Brigandi, vice president of trading at Direxion Funds in New York.

The Dow Jones industrial average <.DJI> was down 33.86 points, or 0.32 percent, at 10,539.82. The Standard & Poor's 500 Index <.SPX> was down 3.15 points, or 0.28 percent, at 1,133.99. The Nasdaq Composite Index <.IXIC> was down 12.03 points, or 0.52 percent, at 2,289.06.

On the first day of trading in 2010, major indexes rallied to their highest closes in more than 15 months.

The U.S. dollar <.DXY> gained 0.6 percent against a basket of major currencies, underpinned by weak German and euro zone data as well as comments from Japan's new finance minister that he wanted the yen to weaken more.

February crude oil futures fell 0.6 percent as signs of tighter monetary policy in China sparked concerns about demand.

Materials and energy stocks were pressured, with Alcoa Inc down 3.4 percent at $16.40 and Exxon Mobil Corp off 0.4 percent at $69.74.

The S&P retail index <.RLX> added 0.7 percent after U.S. retailers posted better-than-expected December sales and many raised profit forecasts.

Sears Holding Corp rose 13.6 percent to $100.95 after the department store chain posted higher sales for December.

But Abercrombie & Fitch Co shares fell 7.4 percent to $33.55 after the apparel retailer reported December same-store sales fell 11 percent.

St. Louis Fed President James Bullard said Thursday the U.S. labor market is improving and the economy is close to the point where unemployment will start to fall.

European stocks were down 0.5 percent around midday in their first broad retreat this year.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)