Profit-Taking Fuels Massive Sell-Off

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 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.

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.”

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

International Business Machines, down 1/4 to 107.

The stock struggled against selling pressures even though the company issued a glowing report on its second-quarter financial results. Investors worried that IBM can’t repeat its impressive performance as the company’s chief warned that demand for computers has crested.

CBS, up 1-1/4 to 71.

CBS Inc. stock gained more ground Tuesday after published reports said Westinghouse Electric Co. is considering offering about $5 billion in cash for the broadcaster, if it can arrange the financing.

NASDAQ

Microsoft, down 7-1/8 to 101-7/8.

Investors sold Microsoft as well as a wide range of computer and related issues to collect profits amassed during the sector’s extended rally. Merrill Lynch reduced a rating on Microsoft to near-term “hold” from “buy” based on how high the stock has risen. Other heavily traded tech stocks included Intel, down 3-3/16 to 73-1/4, Altera, down 1-3/4 to 54-5/8 and Oracle, down 2-1/8 to 40-1/8.

AMEX

Diodes, down 3/8 to 15-7/8.

The stock retreated from highs reached recently in anticipation of solid second-quarter earnings.