August 19, 1983

DANCE need not take place on a proscenium stage. It can spill out into gymnasiums and the streets if necessary. That was one of the innovations of Merce Cunningham and the modern-dance experimentalists of the 1960's. This weekend, innovation will reach new levels, as dance takes to the beach and a church rooftop at opposite ends of Manhattan. Those New Yorkers who don't make it to the Hamptons or even Far Rockaway on a summer weekend know what a feast for the eyes and heat-bedraggled summer psyche ''Art on the Beach'' can be. Founded in 1978 by Creative Time Inc., the festival has become a tradition, bringing visual arts, music and dance to the sands of the Battery Park City landfill.

An article on yesterday's Washington Talk page incorrectly described the position of Nora Engel in the office of Rep. Bruce A. Morrison, Democrat of Connecticut. She is a case worker and former campaign manager.

Markets Stock prices fell sharply, eliminating most of the gains in Wednesday's upsurge, as investors cashed in some of their profits. The Dow Jones industrial average dropped 14.02 points, to 1,192.48, after having risen 16.05 points the day before. In the overall market, declines outnumbered advances by 906 to 674. Turnover fell to 82.3 million shares from 87.8 milion. (Page D1.) Prices of long-term Treasury bonds declined by about three- quarters of a point after having risen by as much as five points in the previous week. In part, the price declines were attributed to a reiteration by Henry Kaufman, the economist, that interest rates will probably rise over the next year. (D5.) Assets of money market mutual funds rose for the second consecutive week. (D6.)

The city of Houston, the dazzling and futuristic metropolis of glass, became the city of flying glass today. Hurricane Alicia roared across the Texas Gulf Coast early today near Galveston and soon found a target 45 miles inland in the very center of this fifth largest city in America. The downtown glass towers, normally so glittery in the summer sun, proved little match for the forces of nature. By the time a murky daylight appeared over the spectactular skyline, hundreds of huge panels of glass windows had dropped like cards, leaving the deserted streets of downtown Houston ankle-deep in glass and other debris.

International A Russian youth left for home by plane with his parents. Andrei V. Berezkhov, the 16-year-old son of a Soviet diplomat, told reporters at Dulles International Airport, ''I wanted to go home and not stay here.'' His departure ended a weeklong tug-of-war between Moscow and Washington that began after letters signed with his name said he hated the Soviet Union and wanted to stay in the United States. (Page A1, Columms 1-2.) The Salvadoran army, the key national institution for more than 50 years, is now the Reagan Administration's proxy in the struggle to contain lefist rebels. The chance of success depends greatly on the army's potential for change. Foreign military experts see a plausible chance that the army will win the war, but they doubt that the privileges, status and power of the officers can emerge entirely unscathed from it. (A2:3-6.)