NEW YORK, NOV. 17 -- It has been a bad year for Steffi Graf, and today was just another rude reminder of how bad it has been.

The once-invincible German was unceremoniously dispatched from the semifinals of the $3 million Virginia Slims Championships, losing to third-seeded Gabriela Sabatini, 6-4, 6-4.

Sabatini's nearly flawless performance was reminiscent of her upset of Graf in the U.S. Open final in September, and it advanced her to Sunday's best-of-five-set final against second-seeded Monica Seles.

Earlier, Seles defeated fourth-seeded Mary Jo Fernandez, 6-3, 6-4, to snatch the No. 2 ranking from Martina Navratilova, who skipped this event to have surgery on her knees.

The departure of the top-seeded Graf was largely the result of an errant backhand and a supremely confident opponent who seemed eager to take on Graf's big serve and forehand.

"I did everything perfect," Sabatini said. "I took my time. I concentrated on every point."

The Virginia Slims Championships, the annual grand finale in women's tennis, has taken on added importance in 1990.

After a decade of domination by Chris Evert, Navratilova and Graf, this year has been wide open.

Graf failed to win a Grand Slam tournament and has spent the season barely clinging to her No. 1 ranking as a procession of younger players has marched up the ladder behind her.

Although her ranking is not immediately at stake, the tournament promised a rare reordering among the leading players.

With Navratilova, 34, sidelined, Seles, 16, had the most to gain. For the first time since 1981, Navratilova is not ranked first or second.

For her part, Graf has had to endure her most disappointing year. She first had to deal with a broken thumb, then her father's highly publicized personal life, a matter that dogged her throughout Wimbledon and has been constant fodder for the German press.

Despite the distractions, she had seemed eager to let everyone know she would not be dethroned easily. She had beaten Sabatini in their two meetings since the Open and, after a three-set match against Jennifer Capriati in the first round here, coasted to a quarterfinal victory over sixth-seeded Katerina Maleeva.

But today, after taking a 3-0 lead, Graf once again showed she is mortal. Sabatini, cheered on by a highly partisan sellout crowd of 18,200 at Madison Square Garden, summoned her best tennis and ran off five straight games before taking the set. Using a combination of patient shot-making, aggressive net play and daring service returns, Sabatini convincingly outplayed Graf.

Graf seemed unnerved by her erratic backhand and by the way Sabatini handled her 97 mph serves. She made uncharacteristic and sloppy mistakes, and once swung her racket in the air in frustration after hitting an easy volley into the net.

The second set was equally frustrating for Graf. Sabatini broke her serve in the first game, and again in the fifth and ninth games. When Sabatini prepared to serve for the match, the crowd gave her a standing ovation.

A downcast Graf said her backhand had deserted her, despite having worked on it for the past few weeks. "I made many easy mistakes," she said.

When a reporter asked her who now deserves to be No. 1, an obviously irritated Graf shot back: "You are laughing. You like to ask that question, right? . . . My answer is, 'Write whatever you want.' "

The match was the 25th between Graf and Sabatini, who has won but five of them.

Although Sabatini's improved play clearly has elevated her stature, she is not the only player to upset Graf in a major this year.

In this 16-player event, all eyes have been focused on Seles. She has assembled a remarkable 50-6 record this year, beating Graf in the French Open final.

Tall and gangly, her choppy strokes belie the strength of her game. Her quick hands and deceptive power have made her a formidable opponent for some of the strongest women in the game.

Nonetheless, Seles has faltered at some of the big events -- she lost in the quarterfinals at Wimbledon and in the fourth round of the U.S. Open -- and some wonder whether she has the consistency to ascend to the top ranking.

"There are a lot of matches I don't play well," Seles said, explaining why she thinks she is still "a couple of years away" from being No. 1.

Today, she relied on the raw power of her choppy two-fisted groundstrokes to defeat Fernandez. The two baseliners had played twice before, each winning once.

Fernandez, a 19-year-old Floridian having her best year, showed flashes of brilliance. She was most effective when she could take advantage of her best stroke -- a reasonably powerful forehand -- or occasionally come to the net to pressure Seles.

After losing the first set, Fernandez found the groove on her forehand and surged to a 4-1 lead in the second. But she lost her rhythm and Seles simply outdueled her with deep, blistering groundstrokes.