Stock prices fell sharply in moderate trading today as market participants reacted to a weaker-than-expected earnings report from International Business Machines Corp. and fears that other corporate results will reflect the sluggish economy.

Analysts said uncertainties about tax revision also helped to depress stock prices.

The Dow Jones average of 30 industrials fell 27.98 points to 1,793.45, bringing its loss since July 2 to 115.58 points.

Volume on the New York Stock Exchange came to 123.17 million shares, against 124.47 million Friday.

Declining issues outnumbered advances by about 3 to 1 on the Big Board. The exchange's composite index dropped 2.24 points to 137.27.

Analysts said investors' confidence, already shaken by the market's poor performance last week, suffered a new setback when IBM reported that second-quarter profits fell to $2.12 a share, down from $2.30 in the comparable period last year.

IBM shares led the NYSE active list and fell 3 7/8 to 139 1/4.

IBM is often cited as a bellwether stock that can influence sentiment in the general market. In addition, the company's report today served to intensify concern about the sluggish state of the economy and high-technology industries in particular, brokers said.

Among other computer and technology issues, Hewlett-Packard dropped 2 to 38 1/8, Digital Equipment 2 5/8 to 86, Data General 3/4 to 31 3/4 and Texas Instruments 4 1/2 to 113 1/4.

The reaction to the Federal Reserve Board's discount-rate cut and subsequent bank prime-rate cuts Friday was minimal.

One exception to the general downtrend was electric utility stocks, which have been recommended by some analysts as "defensive" stocks if a period of continuing weakness develops in the market.

The utility index rose 0.11 point today to a record 204.16.

The day's only gainers among the 15 Big Board volume leaders were Philadelphia Electric, up 1/4 at 21 7/8; Texas Utilities, up 3/8 at 33 3/8; Southern California Edison, up 1/2 at 32 7/8; and General Public Utilities, up 7/8 at 22 7/8.

Energy issues were weak as oil prices remained under pressure.