June 26, 1986

Contrary to the usual trend as the Fourth of July holiday draws near, the average retail price of gasoline around the country has fallen nearly 2 cents a gallon in the last two weeks, and may continue to fall through the holiday weekend. Oil industry analysts said that prices had fallen because the widely anticipated surge in motorists' demand for gasoline - which prompted a substantial buildup this spring in gasoline production and inventories - has failed to materialize. Retail gasoline prices had risen steadily through the late spring after falling to about 90 cents a gallon in late April. Today, at less than $1 a gallon, prices remain about 28 cents a gallon below the level of a year ago. ''People at every level are beginning to worry about moving their product,'' said Daniel Lundberg, a gasoline industry consultant, referring to refiners, distributors and gasoline marketers. ''That's why prices are dropping.''

On Madison Avenue above 60th Street, boutique after boutique has been fitted into former brownstone after brownstone, and what a decade ago was still a neighborhood street for the Upper East Side has gradually become an international shopping district reminiscent of the great shopping streets in Europe. In the last two years the trend has intensified, and the international section of Madison Avenue, centered in the 60's, has expanded dramatically. The area between 59th and 72d Streets is now consolidated into a type of linear department store, anchored by the new Maxim's restaurant at 61st Street on one end, Polo Ralph Lauren Madison Avenue at 72d on the other and the recently remodeled Westbury Hotel in between. Area Poised to Expand Along with its high-profile identity, the dozen-block stretch has developed the efficient ''loop'' organization of a shopping mall, where shoppers stroll up one side to an anchor store and then return down the other side. At night the street is a long line of small, brightly lighted stages.

For the second year in a row, a huge algae bloom is spreading through the coastal waters of Long Island and other parts of the Northeast, posing profound environmental and economic problems for the region. ''This is a significant oceanographic event - no doubt about it,'' said William Wise, associate director of the Marine Sciences Research Center of the State University at Stony Brook, L.I. ''Rarely do you see a bloom over so wide an area and of such density.'' Several scientists say this year's bloom, known as brown tide for the bronze cast the microorganisms give the water, may be even more devastating than last year's similar bloom, which destroyed a large part of Long Island's bay scallop harvest. Widespread Effects Seen The scientists said the algae bloom, of unknown origin, has disrupted the most basic part of the maritime food chain, phytoplankton, and has destroyed a key component of the coastal ecosystem: eelgrass. As a result, Long Island's inshore waters, once abundant in marine life, are becoming increasingly sterile. And that could have widespread effects on everything from tourism to fishing to coastal erosion, officials said.

Companies ITT may sell its telecommunications operations to Compagnie Generale d'Electricite of France for more than $2 billion, Wall Street sources said. A sale of its cornerstone business would leave ITT with service businesses, largely insurance and hotels. The deal would be the most drastic change in the 66-year history of ITT. Sources in France said the talks were at a ''very hot'' stage. ITT stock jumped $4 a share, to $49.375, on the Big Board. [ Page A1. ] Interfirst expects at least a $260 million loss in the second quarter and is eliminating indefinitely its common stock dividend, officials of the Dallas-based bank said. Some of the losses were related to loans to a former director. [ D1. ] BancTexas Group of Dallas has found a buyer but the deal is burdened by stringent conditions. [ D3. ]

Paul Castellano was gunned down in Manhattan last December on orders from his underworld rival, John Gotti, a Federal agent testified yesterday. The testimony marked the first public assertion by law-enforcement authorities that they have evidence implicating Mr. Gotti in the murders of Mr. Castellano, who they had identified as the chief of the Gambino crime family, and his top aide, Thomas Bilotti. A special agent of the Federal Bureau of Investigation, William C. Noon, said Mr. Gotti and a confederate, Angelo Ruggiero, engineered the murders to gain control of the Gambino crime family, which is believed to be the country's largest Mafia group. Mr. Noon's testimony came at a bail hearing in Federal District Court in Brooklyn for Mr. Ruggiero, who was arrested Friday on racketeering and other charges. Mr. Noon, who is an agent in an elite F.B.I. squad assigned to investigate the Gambino family, testified that information linking Mr. Gotti and Mr. Ruggiero to the double homicide came from six confidential informers who had infilitrated the Gambino family.