AMERICAN smaller company stocks pushed some measures to new highs yesterday, but blue chip issues fell amid profit taking.

The Dow Jones industrial average managed to erase an early 32 point slide, but quickly faltered in a bid for its third successive record high, dropping 26.18 points on the day and closing at 7,357.23. The Dow had gained about 125 points over the previous two sessions, nearly breaking above 7,400 for the first time.

Advances outnumbered declines by a 10 to 9 margin on the New York Stock Exchange, with 1,322 up, 1,188 down and 849 unchanged.

NYSE volume totalled 487.18 million shares, against 435.95 million in the previous session.

The Standard and Poor's 500 stock list fell 2.50 to 847.21, and the NYSE's composite index fell 1.01 to 439.66, snapping a two session streak of record highs by both measures.

The Nasdaq composite index rose 0.97 to 1,410.18, the Russell 2000 rose 1.05 to 377.79.