Stocks Roar Back; Half of Mondaly’s Loss Recouped : Dow Soars 186 in Wide Comeback

The U.S. stock market today came roaring back from its $500-billion collapse with the Dow Jones industrial average up a record 186.84, climbing halfway back from Monday’s 508-point nose dive in a broad recovery.

The Dow had regained 102.27 points on Tuesday, mostly on blue-chip buying. Today’s rise was more broadly based, analysts said.

The Dow closed at about 2,027.85, according to preliminary readings, in heavy trading volume estimated at 450.4 million. That was well below the 608 million shares traded Tuesday and Monday’s 604-million mark.

“I think the worst of the damage is over and things have definitely calmed down. The sentiment has gotten much better,” said Jack Baker, head of block trading for Shearson Lehman Brothers Inc.

Seeking Bargain Prices

Traders said many investors were re-entering the market with the hopes of picking up stocks at bargain prices following Monday’s record collapse.

Advancing issues swamped declining ones by a 9-to-1 margin on the New York Stock Exchange.

“We see a large increase in greed here. We’re seeing people throwing money fast and hard and maybe without thinking,” said Thomas Czech, first vice president for research at Blunt Ellis & Loewi Inc. in Minneapolis.

Today’s rally seemed healthier than Tuesday’s because it was not confined to blue-chip stocks. Stocks gained across the NYSE as well as on the American Stock Exchange and in the over-the-counter market, which had fallen sharply on Tuesday.

“It’s going to be as hectic on the upside as it was on the downside,” Czech said. “People are not answering phones. In some cases ‘ask’ prices are below bid prices,” Czech said.

The Dow industrials’ plunge Monday wiped out 22.6% of the index’s value--a bigger one-day decline than in the Crash of 1929.

Companies, in particular, were buying back their stocks en masse.

‘Overshot on Down Side’

“What these corporations are saying is that the best buy and the best way to invest their money is in their own stocks,” said Larry Wachtel, first vice president of Prudential-Bache Securities Inc. “That endorses the fact that the market overshot on the down side.”

Dennis Jarrett, technical analyst for Kidder, Peabody & Co., said the buybacks also represented a show of unity among companies to support the market, as well as a means of protection against corporate raiders.

Traders said investors were heartened by the sharp decline in interest rates and by President Reagan’s declaration after Tuesday’s close that he was willing to work with Congress to resolve the impasse over the federal budget.

“I think the most favorable thing is that the Administration has been shocked into realizing that something’s got to be done,” said Raymond F. DeVoe Jr. at Legg Mason Wood Walker Inc.

Rally in Japan

Analysts said traders also were growing increasingly confident that no crisis for the dollar and international monetary cooperation was imminent. They noted that stocks rallied in Japan today and that authorities in West Germany, where interest rates had been rising, lowered an important financing rate.

Despite today’s rally, many analysts remained cautious about the stock market’s future.

“We think the market action over the next several weeks will be erratic, and by no means is the market embarking on a new bullish phase here,” said Baker. “We wouldn’t be surprised to see further slippage in the weeks ahead.”

Jarrett agreed: “The probability of a straight upward movement from where we were on Monday is very, very low. We normally have a bounce, but we have to go back and rebuild.”