(Updated with stock prices at the market close.)

NEW YORK ( TheStreet) -- After a sharp weeklong rally, share prices in the volatile dry-bulk shipping sector retreated dramatically Thursday as the broader equities markets sold off and shipping rates, in the words of one analyst, "hit a wall."

The Baltic Dry Index, which tracks spot-market shipping rates across a range of dry-bulk vessel sizes, inched higher by 18 points Thursday, but it was the largest ships on the seas, the capesizes, that were experiencing the rate pressure. The average rate on the spot market for a capesize booking fell to $87,118 per day, down 1.6% from the prices being fetched on Wednesday, according to the Baltic Exchange, a London ship brokerage that administers the BDI.
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This was partly caused by a drop in the price of Chinese-made steel rebar, Omar Nokta, an analyst with the New York firm Dahlman Rose, wrote in a research note to clients Thursday.

Though freight voyage activity has remained brisk, Nokta said, rumors entered the market that BHP Billiton ( BHP), the giant Australian mining company, would "back away" from booking more ships next week "after having secured 15 capesize cargoes already this week."

The BHP scuttlebutt, in turn, weighed on shipping futures, known as Forward Freight Assessments, or FFAs, which are increasingly used as a hedging instrument. The first-quarter 2010 FFA contract for capesize vessels dropped to $48,000 per day from $55,000 on Wednesday.

A broad decline in stocks Thursday -- with the Dow Jones Industrial Average falling more than 100 points on data that indicated a record number of foreclosures occurred in the third quarter -- may also have provided dry-bulk investors with a reason to take profits, as some market participants had begun to worry about a peak in both rates and shipping stock prices a few days ago.

Leading the decliners Thursday afternoon were shares of Eagle Bulk Shipping ( EGLE - Get Report), which tumbled more than 13% to $5.87; Genco Shipping & Trading ( GNK - Get Report), which fell 11.1% to $25.10; and Excel Maritime ( EXM), which lost 11.9% to $7.40. All three names enjoyed some of the sharper gains during the sector's week-long run to the upside.

Elsewhere, DryShips ( DRYS) shares dropped 8.5% to close at $6.53; Diana Shipping ( DSX - Get Report) lost 7.1% to $16.69; and Navios Maritime ( NM - Get Report) retreated 8.3% to $5.93.

Holding up relatively well were the U.S.-listed issues of Safe Bulkers ( SB - Get Report), down 3.7% to $9.05, and Star Bulk Carriers ( SBLK - Get Report), down 2.2% to $3.50.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.