Blue-chip stocks fell steeply yesterday after Xerox and a regional banking company issued profit warnings. The warnings resonated throughout the market, sending the Dow industrials to the biggest sell-off in two months and reviving fears that rising interest rates will take a toll on corporate profits.

Technology stocks were a lone source of strength, helping the Nasdaq finish with modest gains.

The Dow Jones industrial average plunged 265.52 points, or 2.5 per cent, to close at 10,449.30. It was the Dow's worst performance since its stunning 617-point drop on April 14th.

Broader stock indicators held up much better than the blue-chip Dow. The Standard and Poor's 500 index was down 14.14 at 1,464.46, and the Nasdaq composite index was up 14.75 at 3,860.49.