NEW YORK (AP) _ Wall Street wilted under the pressure of profit taking Tuesday that toppled the stock market from its record heights in its biggest daily drop in two months.

Investors eager to collect some of the profits amassed during this year's dramatic advance in stock prices targeted technology issues in particular. But the urge to cash in winnings impacted a wide range of stocks.

The downtrend was intensified by periodic rounds of computer-guided program trading, which was curbed when the deficit in the Dow Jones industrial average swelled to 50 points.

The blue-chip indicator finished 50.01 points under the peak reached Monday at 4,686.28. The loss, which amounted to 1.06 percent, was the largest since a drop of 81.96 points on May 18.

Virtually all measures of stock performance suffered setbacks. The New York Stock Exchange composite index fell 1.63 to 298.38, Standard & Poor's 500 fell 4.26 to 558.46 and the American Stock Exchange market value index lost 2.18 to 516.81.

Losers outnumbered gainers by about 2 to 1 on the NYSE where volume expanded to 372.16 million shares as of 4 p.m. Eastern time. On Monday, 322.55 million shares changed hands on the Big Board's floor.

Investment professionals regarded Wall Street's setback as a natural reaction to this year's almost uninterrupted rally.

``The market took a necessary rest and correction,'' said Ned Riley, chief investment officer of The Private Bank, a Bank of Boston division. ``The interesting point is that the group that has been the strongest in leadership is leading the correction.''

The Nasdaq Stock Market bore the brunt of the selling with prices receding as technology stocks stumbled against concerns about the outlook for computer and related companies.

Nasdaq's composite tumbled 17.36 to 988.53, retreating back below 1,000 after crossing that mark for the first time on Monday.

An extended and powerful rally in tech stocks had been providing much of the fuel propelling the Nasdaq, the Big Board and other major exchanges forward this year.

But a warning flag about the computer industry's outlook was raised in the quarterly earnings report released Tuesday by industry bellwether International Business Machines.

In reporting impressive second-quarter results, Louis V. Gerstner Jr., IBM's chairman and chief executive officer, suggested they will be hard to match during the rest of the year.

``There are a few signs that demand may be slowing and price pressures increasing in the United States, and a number of key European countries remain sluggish,'' Gerstner said.

IBM earned $1.7 billion in the second quarter, about 2 1/2 times its profit from the same period a year ago, as the biggest computer company enjoyed a healthy 14 percent jump in sales.

Despite the healthy quarterly performance, IBM stock struggled through the session. By late afternoon, IBM had recouped most of the day's losses and stood at 106 3/4, off 1/2.

Shares of semiconductor, software and other computer companies came under heavy selling pressure. Microsoft slumped 7 to 102 and led the Nasdaq list of active stocks.

A.C. Moore, senior investment strategist at Dunvegan Associates Inc., said the behavior of IBM's stock and the overall tech selloff suggested the sector might remain weighed down for awhile.

``It's a case of sell on the news,'' he said. ``When stocks react negatively to good news, it suggests that they are at a turning point.''

Weakness in the bond market, which grew pronounced in late trading, had a depressing influence on equities. The benchmark 30-year Treasury bond lost 1 1/8 points, which drove up its yield to 6.76 percent.

Markets overseas also experienced selling. In Tokyo, the 225-issue Nikkei Stock Average closed at 16,574.35, down 268.12 points, or 1.59 percent. Stocks lost ground in all the major European markets.