Stock Market Posts Second Record Gain

NEW YORK--The stock market rebounded robustly yesterday, with the Dow Jones industrial average posting its second straight record one-day gain amid mounting hopes that the worst of Wall Street's recent woes may be past.

Analysts were encouraged by the rally, but many cautioned against false optimism.

The Dow Jones average of 30 industrial stocks soared 186.84 to 2,027.85, a 10.1 percent increase. That surpassed the previous record point gain of 102.27 points on Tuesday.

The closely watched index has now recovered about half the losses suffered from Monday's historic 508-point collapse, which amounted to a 22.6 percent decline in value.

Broader market measures were equally as strong yesterday. Advancing issues outpaced decliners by about 8-to-1 on the New York Stock Exchange.

As measured by Wilshire Associates, index of more than 5000 stocks, the market gained $183 billion in value yesterday after falling more than $500 billion Monday.

Big Board volume totaled 449.35 million shares, the third busiest trading day ever but well below the record-setting level of Tuesday when 608 million shares changed hands.

Traders said many investors were re-entering the market yesterday with the hopes of picking up stocks at bargain prices following Monday's record plunge. Companies, in particular, were buying back their stocks.

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.

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 and that authorities in West Germany, where interest rates had been rising, lowered an important financing rate.

Despite the 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 Jack Baker, head of block trading for Shearson Lehman Brothers Inc. "We wouldn't be surprised to see further slippage in the weeks ahead."

Dennis Jarrett, technical analyst for Kidder, Peabody & Co., 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."