Although the spotlight was on the heavyweight boxers, the Italian basketball team threw the hardest punch at the Olympics today.

The lightly regarded Italians scored the upset of the Games Saturday by beating the Soviets. Then they knocked the favored hosts from the championship game with a 95-89 victory over Spain this morning combined with Yugoslavia's one-point decision over Brazil tonight.

Yugoslavia versus Italy for the gold medal is not what international basketball fans had in mind here. The Americans and Soviets were supposed to whack each other in the sporting equivalent of war. But the boycott kept the U.S. away -- and two cloddish performances by a Soviet team seemingly destined to get worse allowed the Italians to challenge for the gold.

They should lose. In truth, Yugoslavia ought to win Wednesday by about as much as Teofilo Stevenson did in the boxing quarterfinals this afternoon. Stevenson measured a Pole named Grzegorz Skrzecz for about half the first round, then knocked him out on his feet with 48 seconds left in the third.

In his bid for a third straight Olympic gold medal, Stevenson will next face in the semifinals Hungarian Istvan Levai, winner by decision over Anders Eklund of Sweden.

Eklund is boxing's version of the Soviet basketball team, enormous -- nearly 6 feet 6 -- but slow. Levai, about a head shorter, escaped Eklund's jabs after the first round, whumped him upside the head with three wicked roundhouse lefts and won a 4-1 decision.

That third hard left sat Eklund on his backside with about six seconds left in the second round, but he was up by the time the bell rang. Levai controlled the fight in the third round -- and only the Tanzanian judge thought Eklund the winner.

Until today, many boxing insiders might have given Levai a decent chance against Stevenson in Thursday's semifinals. After all, Stevenson is 29 and slowing some. He does not appear to be bored by these Olympics. though, for he went at Skrzecz with a vengeance.

Levai fought Stevenson earlier this year, in a relatively unimportant bout, just the sort in which Stevenson might be vulunerable. Levai appeared to be winning, but Stevenson knocked him out in the final 10 seconds.

The Pole Stevenson fought today hasd seemed quite aggressive in his last bout, a knockout of a huge Tanzanian. Today, he scarcely took a forward step. Once he actually stood frozen for a few seconds and Stevenson -- clearly caught off guard -- failed to unload his lethal right.

But victory was never in doubt after the first 30 seconds. That was when Stevenson realized the man with four Z's in his name could be punched into more on the floor. Stevenson sent some frightful rights toward Skrzecz, but they hit only air.

Stevenson smacked Skrzecz hard enough for two standing eight counts in the second round. After the third one, the referee stopped the fight.

In the other heavyweight quarterfinal bouts, Jurgen Fanghangel of East Germany and Soviet Pyotr Zaev were the winners. Fanghangel knocked out a Bulgarian and Zaev outpointed Italian Francesco Damiani.

Italy-Spain in basketball was more entertaining than the boxing, although one player could be judged excellent.That was center Dino Meneghin of Italy, whose free throws sank the Soviets Saturday and whose 29 points stopped Spain today.

Italy plays with abandon, but not always with its head. Meneghin scored only seven points in the first half, when Italy got a two-point lead, and rarely touched the ball. Spain packed a zone against him and dared the Italian guards to hit from the outside.

They did. At one point, the game became almost an individual duel between former Americans now citizens of Italy and Spain. At one end of the court, Mike Sylvester, who played collegiately at the University of Dayton, would hit an outside jumper. At the other, Wayne Brabender, formerly of the University of Minnesota at Morris, would drive and score.

Sylvester had one fourth of Italy's 48 halftime points and 16 in all when he fouled out with 13 1/2 minutes to play. Brabender had 10 first-half points but was not an offensive factor the second.

The Soviets had a chance to make the gold-medal game if Brazil beat the Yugoslavs -- and Brazil had a chance to do exactly that after time apparently had run out. The situation was something like the way the Soviets won the gold from the U.S. in Munich.

Near the end of the game, Yugoslavia's Mirza Delibasic sank two free throws to put his team ahead, 96-95. Seconds later, after a faraway Brazilian shot missed, the buzzer sounded. But the game was not over.

The clock was incorrect, officials ruled, and the Yugoslavs were summoned from their dressing room. With three seconds showing on the clock, Brazil put the ball in play, and Jose Saiani tried another long shot and missed.

Spain and the Soviets will play for the bronze medal.

There was no track and field today. Wednesday, the French will get a chance for a gold medal: they have three of the favorites in the pole vault. Also, a fading Alberto Juantorena will defend his 400-meter title against seemingly stronger opposition. And Soviet Vasily Alexeyev will try to maintain his stature as the world's strongest man in the superheavy-weight weightlifting.

The Soviets won enough events today to set an all-time Olympic medals record of 55 gold and 137 total medals. They held the previous marks of 50 golds at Munich and 125 total medals at Montreal.

The Soviet equestrian team, hardly an international force, won the decimated Grand Prix show jumping event. The Soviets also captured titles in men's team saber fencing, men's handball, water polo and women's volleyball. i

Soviet Leonid Taranenko broke two world weight lifting records in the 242-pound class with a jerk of 528 pounds and a combined lift of 929.5.

India tripped Spain, 4-3, to win its eighth men's Olympic field hockey title.