Stock prices plunged on Wall Street yesterday, driving the Dow Jones industrial average down 76.93 points, as the U.S. dollar hit new lows on foreign currency markets.

The Dow closed at 1833.55, a drop of 4 percent, as all 30 stocks in the blue-chip average retreated in heavy trading. The Dow was off 110 points at 2 p.m. but later recovered.

The day's decline took the index within 95 points of its closing level of 1738.74 on Black Monday, Oct. 19, when the Dow fell 508 points.

The dollar was battered in Tokyo and London before U.S. financial markets opened, a pounding Wall Street saw as threatening new inflation. A falling dollar can add inflationary pressure as imported goods become more expensive and domestic producers find room to raise their prices.

To halt the dollar's slide, U.S. officials may face the distasteful prospect of raising interest rates to make the dollar more attractive to foreign investors. But economists said the dollar's weakness reflected the growing belief that the Reagan administration was willing to see it fall even more. {Story on Page B1.}

The dollar dropped to 131.95 yen and 1.6320 West German marks on overseas markets before recovering and closing in New York at 132.23 yen and 1.6380 marks. On Friday, the dollar bought 133.60 yen and 1.65 marks.

Intervention by the Bank of Japan helped check the dollar's fall against the Japanese yen on the Tokyo foreign exchange market early today, and stock prices there rebounded after an early plunge, The Associated Press reported. The 225-issue Nikkei Stock Average dropped 362.92 points after the first 45 minutes of trading but recovered to end the morning session down 239.11 points at 22,447.67.

U.S. market analysts said the dollar's sudden slide was created by doubts overseas about the budget deficit plan and worries about the health of the U.S. economy. The selling wave that resulted, the analysts said, cracked the veneer of self-confidence that was beginning to develop in the stock market as prices appeared to be stabilizing.

Speaking at a luncheon of the Heritage Foundation yesterday, President Reagan said, "I know some people are disappointed with that {budget deficit} deal. I don't expect people to be jumping up and down in ecstasy."

However, he said, important aspects of the $76 billion agreement "should be reassuring to conservatives, indeed to everyone. There are no new across-the-board taxes."

The breadth of yesterday's stock selloff, which was reminiscent of the mood of the October collapse, was reflected in the losses in all key market averages. On the New York Stock Exchange, losing stocks led gainers by 8 to 1, and 268 million shares were traded after weeks of relatively light volume.

With investors fleeing stocks, the bond market rallied after early setbacks in overseas markets. A key 30-year Treasury bond, which had been down as much as $7.50 for each $1,000 of face value earlier in the day, reversed direction and rose more than $5 per $1,000 by the end of trading.

The 30-year Treasury bond's yield, which moves in the opposite direction of its price, dropped to 9.11 percent from 9.13 percent. Short-term interest rates fell even more sharply, about one-third of a percentage point.

The torrent of selling that engulfed the stock market was described by analysts as a clear signal that investors at home and abroad did not like the outlook for the U.S. economy, inflation or for the stability of the dollar. Efforts to cut the federal budget deficit also were cited as being unconvincing to investors.

"Investors are not happy with the budget cuts now that they have dissected them," said Peter DaPuzzo, head of equity trading at Shearson Lehman Bros. in New York.

"The market will continue to deteriorate until confidence is built up," DaPuzzo said -- something that would happen, he added, if the dollar stabilizes. With the dollar falling, he said, "We're coming from a budget deficit crisis -- even though it is still not settled -- to a dollar crisis."

Frank Mita, head of foreign exchange at American Security Bank in Washington said, "The sentiment in the {foreign exchange} market is very negative and I feel it is going lower." Mita said he was expecting to see the dollar drop to about 120 yen and to about 150 marks.

The negative sentiment, Mita said, was related to the plan to cut the budget deficit. "Investors felt the budget process was a half-hearted exercise," he said.

Hugh A. Johnson, chief economist at First Albany Corp. in Albany, N.Y., said the falling dollar was "a renewal of the fear that the economy is going to run into tough times in 1988. Everybody knows how fragile the economy is."

Johnson said he thought that moves made last week by West Germany and France to lower interest rates would have a beneficial effect on the investment climate, but that it was not happening. "The market is saying, 'It's not quite that easy.' And the foreign investors were beating down on U.S. stocks, bonds and the U.S. dollar," he said.

As for reaction to the budget deficit cutting plan, Johnson said, "The rest of the world doesn't believe that the steps taken in Washington were a monument to political courage."

Computerized program trading played a role in the early slide of stock prices yesterday as the prices of futures contracts on stock indexes fell below the prices of the stocks contained in those indexes. That made it profitable for major investors to buy the futures and sell the baskets of stocks, putting pressure on stock prices.

The New York Stock Exchange index dropped 5.47 points to 129.69. Standard & Poor's 500-stock index fell 10.04 to 230.30. The American Stock Exchange index fell 8.58 to 242.39 and the National Association of Securities Dealers composite index fell 11.31 to 305.16.

On the trading floor, Ohio Edison was the most active NYSE-listed issue, down 5/8 to 19 3/4. Texas Utilities was off 1/8 to 28 7/8. Union Electric fell 3/4 to 22 1/2.

AT&T was off 1 to 27. IBM fell 4 1/8 to 110 3/4.

Among other blue chips, General Electric was off 1 1/2 to 42 3/8, American Express was down 1 1/4 to 22 3/8, Sears was off 1 1/8 to 32 1/4, USX was off 1 1/8 to 28 1/8 and Merck was down 5 1/2 to 170.

Texaco was off 1 7/8 to 31 5/8. Pennzoil gained 1/4 to 75.