May 7, 1982

Prices advanced and yields fell sharply on both short- and longterm Treasury securities yesterday in one of the most buoyant markets in weeks. Many long-absent institutional investors were the most eager buyers as they perceived yields topping out. The resultant desire to lock in current yields carried over into the corporate debt and tax-exempt markets, where prices were also marked up sharply. In the stock market, prices moved broadly higher in heavy trading, spurred by the news of a tentative plan to settle the battle over the Federal budget deficit. The Dow Jones industrial average rose 8.75 points, to 863.20. (Page D6.)

Governor Carey yesterday ordered a state investigation of corruption in the building and construction industry. The inquiry will include public hearings and focus on purported organized-crime influence and racketeering, the effect of corruption on public building projects and the effectiveness of law enforcement, the Governor said. Mr. Carey credited a recent series in The New York Times on corruption in the industry with bringing public attention to the problem. He said the investigation would be conducted by the State Commission of Investigation.

In its first use of the new shelf-registration process, the American Telephone and Telegraph Company is selling 2 million newly issued shares of common stock for $110.8 million to Morgan Stanley & Company, the company announced late yesterday. Morgan Stanley, which for years has underwritten most A.T.& T. stock offerings as the company's traditional investment banker, competed for the offering and finally won with a bid of $55.40 a share, A.T.& T. said. It did not identify the other bidders.

After a period of watching awkwardly while his aides negotiated with Congressional leaders on the budget, and then following with a volley of partisan denunciation of Democrats, President Reagan has burst into the open this week with a series of startling accommodations. In part, his moves were a product of months of efforts to reach accomodations on issues deemed essential to key voting groups. Such was the case in the White House's endorsement of a proposed constitutional amendment to permit organized school prayer, a bill to curb the courts' power to order busing for desegregation, a modified ''new federalism'' proposal to transfer programs to the states and a compromise on the extension of the Voting Rights Act. In part, as well, Mr. Reagan's actions, especially on the budget, were forced by events beyond his control and by a situation in which his own advisers feared he appeared to be foundering publicly in his own partisanship and obstinacy.

A new laser procedure has proved highly effective in treating the leading cause of newly developed cases of blindness among the elderly, the National Eye Institute reported today. The results are so promising that the institute took the unusual step of disclosing them at a news conference to spread the word quickly. It has also terminated further clinical tests and today urged all potential patients to seek the laser treatment promptly. The nonsurgical treatment, which takes 10 minutes, is almost useless if not applied within a few weeks of the onset of symptoms. The disease, called senile macular degeneration, can cause loss of vision when tiny blood vessels grow into and displace the macula, the thumbtack-sized structure that controls central vision in the retina.