July 15, 1986

The United States has agreed to a Soviet proposal that the two sides meet in Geneva July 22 to discuss President Reagan's decision to repudiate the strategic arms treaty of 1979, Administration officials said today. But the Administration also intends to broaden the agenda by discussing what it says are Soviet arms treaty violations, the officials added. A White House spokesman, Edward P. Djerejian, said today that the United States had responded to the Soviet request for a meeting but declined to characterize the nature of the response or to provide any details. No Formal Public Commitment ''We have communicated with the Soviet Union through diplomatic channels. We will withhold any further comment until this process is completed,'' Mr. Djerejian said. Other Administration officials said later, however, that the United States had agreed to the meeting.

With declining corporate profits and the weak economy remaining foremost on Wall Street's list of concerns, stock prices dropped sharply yesterday and the Dow Jones industrial average plummeted through the 1,800 level to its lowest close since late May. ''It was the same reaction that you saw last Monday, just not as dramatic,'' said Peter Furniss, senior vice president of trading for Drexel Burnham Lambert Inc., comparing yesterday's action with the record-setting 61.87-point drop on July 7. The Dow Jones industrial average fell 27.98 points, to 1,793.45. Just two weeks ago, the average soared to more than 1,900 for the first time ever.

A Federal judge ruled yesterday that illegal aliens living in New York State cannot be denied Medicaid assistance. Observers said the ruling, if it stood, would have a major impact in the state and could lead to lawsuits in other states challenging Federal restrictions on Medicaid, which assists those who are ill and financially needy. Federal and state officials had no immediate comment on the decision. The 60-page ruling was handed down by Judge Charles P. Sifton in District Court in Brooklyn. He wrote that the 1966 statute authorizing Medicaid contained ''no express restrictions on alien eligibility,'' and that Federal authorities had acted improperly in 1973 when they forbade Medicaid for illegal aliens.

Deficit projections for 1987 are rising beyond the ceiling set in the budget-balancing law, President Reagan's budget director, James C. Miller 3d, said today. He urged Congress to repair the law by giving him the power to make automatic spending cuts. House Speaker Thomas P. O'Neill Jr. who has opposed the law, said today that if it had to be changed he would prefer giving the Office of Management and Budget, headed by Mr. Miller, the authority to order the automatic cuts. The comments came as Congress returned from its Fourth of July recess to face the consequences of the Supreme Court decision last week that struck down the provision to force automatic spending cuts if the ceilings are not achieved.

Deeply mired in the computer slump, the International Business Machines Corporation yesterday reported a sharp 7.7 percent drop in its second-quarter profits. It said that without an upturn in the nation's capital spending, ''it will be difficult to show earnings growth in 1986.'' I.B.M.'s showing was unexpectedly poor: It earnings came at the very low end of Wall Street estimates. That sparked an immediate selloff by small and large investors alike, driving I.B.M. shares down $3.875, to $139.25. The giant computer company was the most active issue on the New York Stock Exchange, with 2.2 million shares changing hands, and it spurred a broad selloff and lower prices throughout the stock market. While profits suffered, I.B.M.'s revenues rose 7.3 percent for the quarter, to $12.27 billion, from $11.43 billion in the quarter a year ago, the only source of encouragement to many analysts. The net income of $1.305 billion, or $2.12 a share, compared with $1.414 billion, or $2.30 a share, in the second quarter of 1985. For the first six months of the year revenues were up 5.6 percent, but net income was down 3.3 percent.