The stock market plummeted unexpectedly yesterday, largely as the result of the kind of computer-coordinated trading that has prompted the presidential Brady Commission to call for unified oversight of the stock and commodity markets.

The Dow Jones industrial average suffered its third worst loss ever, dropping 140.59 points to 1911.30, and more than wiping out all the gains made in the New Year's rally over the last four days.

The 6.85 percent drop in the Dow was one of the 20 worst percentage declines in Wall Street history, and the point decline was topped only by the record 508 plunge on Oct. 19 and the 156.83 drop a week later. The selloff rekindled nervousness about the stock market's volatility and its impact on the nation's economic health.

On the New York Stock Exchange, seven stocks lost for every one that gained. The Standard & Poors 500 stock index was down 17.69 to 243.4. The average share on the American Stock Exchange lost 41 cents and the Nasdaq index of over-the-counter stocks declined 11.19 to 338.47.

Dow Jones attributed 80 to 100 points of the drop in the Dow index to so-called program trading in which big institutions buy stock index futures contracts in Chicago and sell stocks in New York, locking in instant profits. The impact of program trading remains the most controversial question about the 508-point plunge in stock prices on Oct. 19.

Even the heavy program trading left analysts struggling to explain what happened, especially in light of the Labor Department's announcement that the unemployment rate had fallen to 5.8 percent, the lowest since 1979.

"Oct. 19 is still fresh in everyone's minds," said Tom Gallagher, a managing director of Oppenheimer & Co. "The market trades as if it were a commodities market. People are afraid of that."

The climbing value of the dollar, which had been credited with bolstering stock prices earlier this week, continued upward, but did the stock market no good. The dollar rose in Tokyo for the fourth consecutive day to 129.45 yen, up from 128.995. In Europe the dollar rose to 1.65 West German marks from 1.642, before easing to 1.6365 in New York. The yen closed at 128.35 in New York.

In the bond markets, the yield on the 30 year Treasury issue rose sharply to 9.13 percent, up from 8.95 percent Thursday.

Some blamed the stock market slump on a report in The Washington Post Friday that the 1989 federal budget deficit could be as much as $31 billion above the ceiling set by law. Others were discouraged by news that West Germany plans to raise some taxes, rather than lower them and stimulate its economy.

But none of those factors explained why stock prices fell so much.

"I honestly don't know. Nobody knows. It was a really weird day," said Harold Nathan, senior financial economist with Wells Fargo Bank in San Francisco.

"There's no economic rationale," Nathan added, "The only reason could be interest rates shot up sharply. It was a thin market because of snow in the East so it didn't take much."

Early in the day, stock prices reacted perversely to the positive economic news that the nation's unemployment rate had dropped to its lowest level since 1979, 5.8 percent. {Details on Page C1.}

One view of the Wall Street response was that this good economic news was interpreted as bad for stock prices. Falling unemployment indicates the economy is growing steadily, so there is no need for the Federal Reserve to cut interest rates to spur growth.

The Fed, in fact, could afford to raise rates, as many economists say it should to bolster the falling value of the dollar. And higher rates generally depress stock prices.

The unemployment report raised fears not only of higher interest rates, but also of inflation, which is "not exactly what stocks wanted to hear at this time," said Steve Chronowitz, director of futures research at Smith Barney Harris Upham & Co.

Other interpretations dismissed the impact of the unemployment report and said stock prices fell because traders thought they could cash in on quick profits after the market had climbed 113 points in the last four days.

When those sell orders hit New York, there were fewer buyers than usual because of the winter storm that moved up the East Coast, sending stock traders scurrying for the ski slopes, the suburbs and a surprise three-day weekend.

The plunge shows the stock market is still extremely vulnerable, said Edward P. Nickoski, a market watcher at Piper Jaffray & Hopwood, a Minneapolis broker. "Every body bought in the early part of the week with the anticipation that the market would be going into the latter part of January or mid-February without any serious problems. The attitude wasn't euphoric this week, but a lot of people let their guard down."

Several analysts said they expect the stock market to remain skittish, especially for the next week or so.

The U.S. merchandise trade figure, which will be released next week, has become one of the most important factors in the stock market because of the impact of the trade deficit on the nation's economy.

Rumors that the trade deficit might explode to $20 billion for November were among the factors blamed for driving down stock index futures prices in Chicago.

Traders trying to profit from differences between prices of stocks and stock index futures took advantage of that situation to buy futures and simultaneously sell stocks, triggering the late day plunge in stock prices.