NEW YORK -- Strong war talk from British Prime Minister Margaret Thatcher pushed oil prices sharply higher yesterday and sent stock prices sharply lower.
The Dow Jones industrial average, which had been falling a bit by noon, began dropping even faster when traders received word that Mrs. Thatcher had threatened to use force against Iraqi President Saddam Hussein.
Traders had feared that the Treasury's huge bond and note auction might not go too well, but they soon forgot the auction, particularly after yesterday's results turned out be in line with expectations, and started watching oil prices.
By the end of the day, the Dow had plunged 44.31 points, to 2,440.84. Trading picked up to 149.1 million shares from 141.1 million Tuesday.
Birinyi Associates, which monitors program trading, said nine waves of computerized selling clipped 40 points off the Dow throughout the day -- all but a few points of the decline.
Declining stocks outnumbered gainers more than 2-to-1, showing that the selling was widespread. Eighty-three stocks fell to new lows; only two reached new highs.
What changed the market focus was Mrs. Thatcher's comments on the 3-month-old Persian Gulf crisis.
"Either he gets out of Kuwait soon, or we and our allies will remove him by force," Mrs. Thatcher said in Parliament, referring to Mr. Hussein.
Dennis E. Jarrett, chief market analyst for Kidder, Peabody, said of the market: "It's all related to oil. Thatcher's comments and the huge increase in oil drove bonds and stocks south."
Kenneth P. Ducey, senior vice president in the trading department of S. G. Warburg & Co., said: "The market started dropping because the elections didn't go as well as expected. After Margaret Thatcher, it was all the Middle East."
About 12:45 p.m., when the news of Mrs. Thatcher's remarks reached Wall Street, oil prices had climbed only $1 a barrel, to $33.60. But by the close they had moved up $2.68, to $35.31.
One trader remarked that everything went against the market yesterday:
* The Dow utility average fell almost 2 percent, a sign that bond yields could rise, which would depress stock and bond prices.
* The Commodity Research Bureau index, which fell to a new low only two days ago, rose for the second straight day, putting more pressure on prices.
* The New York Stock Exchange financial index fell more than 1 percent, suggesting that bank and insurance stocks continued to be under strong pressure.
* Bond prices declined as the prospect dimmed for now that the Federal Reserve might lower interest rates. Traders also said that the Treasury might have to raise yields a little to sell 30-year bonds today.
MCA, which is in the midst of takeover talks with Matsushita of Japan, fell 1 1/2 , to 61 1/2 , in heavy trading after a fire seriously damaged its Universal Studios just outside Los Angeles Tuesday night.
MCA said it thought the loss was covered by insurance. Traders speculated that the merger talks might be endangered.
Among Dow transportation stocks, AMR fell 1 1/4 , to 46 7/8 ; Delta 1 1/8 , to 57 1/4 ; and UAL 1 1/8 , to 97 1/8 .
All 15 of the Dow utilities fell. Columbia Gas was down 1 3/8 , to 51 5/8 ; Consolidated Natural Gas 1, to 47 1/4 ; Consolidated Edison 1, to 22 1/2 ; and Philadelphia Electric 5/8 , to 16.
Among other utilities, Duke Power fell 7/8 , to 30 1/4 , and Nevada Power 1/2 , to 21 7/8 .
Oil stocks also slid broadly. Mobil was off 2 1/4 , to 57 3/8 ; Amoco 14, to 52 3/4 ; Exxon 1, to 48 1/4 ; Chevron 1 1/2 , to 67 3/8 ; Texaco 1, to 57 3/4 ; and ARCO 1 1/4 , to 129 1/2 .
Browning-Ferris, a waste-control company, topped the Big Board active list for the second straight day, falling 2 1/2 , to 21 3/4 , on volume of 2.9 million shares. It fell 6 Tuesday after reporting disappointing profits.