Stock prices reversed a sharp early slide today with the Dow Jones Industrial Average closing up 7.52 points.

Bond prices, in the meantime, startled Wall Street experts by rising sharply. Bond prices had been expected to fall following the announcement late Friday that the money supply had risen nearly $10 billion.

At the same time, most short-term interest rates declined slightly, although the Federal Reserve, the nation's central bank, entered the marketplace to withdraw lendable funds from the banking system, an action most analysts interpreted as an attempt by the Fed to hold down the growth of the money supply. Most experts believe that excessive money growth that is a major cause of inflation.

It was concern about that huge jump in the money supply that sent stock prices tumbling in the first half hour of trading on the New York Stock Exchange today. The Dow average was off about 6.5 points by 10:30 a.m. and was down nearly six points at 11 a.m. But in the last two hours of trading the Dow average moved into the positive range and the number of stocks rising in price on the day barely overtook the number of stocks whose prices deteriorated. The Dow Jones Industrial Average closed at 855.12.

Analysts said much of the recovery in stock prices could be attributed to "bargain-hunting." Stock prices have performed poorly since the first of the year. John Burnett, vice president of Donaldson, Lufkin & Jenrette, told Dow Jones News Service that the stock market "was overdue for a rally."

Volume on the New York Exchange totalled 45.1 million shares, compared with 43.3 million on Friday. The New York Stock Exchange's own index closed at 87.84, up 0.43 point.

On the American Stock Exchange, volume was 4.1 million shares compared with Friday's 3.8 million shares. The American exchange's index closed down 0.12 point to 296.49.

William Sullivan, vice president of the Bank of New York, said he was surprised by the sharp increase in bond prices. "In all cases we see higher prices and somewhat lower yields interest rates ," Sullivan said.

Because bonds are long-term securities that carry fixed interest rates, higher prices for bonds result in lower rates and vice versa. Sullivan said that the key Treasury bond that matures in 2011 rose $20 per $1,000 of face value today. Bond prices fell sharply in the light trading that followed the Fed's money supply announcement.

The federal funds rate, the interest banks charge each other for overnight loans of excess reserves and a rate the Federal Reserve can influence by supplying or withdrawing lendable funds from the banking system, rose today after the central bank withdrew funds by selling Treasury securities. The federal funds rate was about 12 3/4 percent when the Fed took its action and rose to 13 percent by the end of the trading day.

But most short-term rates, which tend to rise when the federal funds rate rises, fell instead. For example, most rates on bank certificates of deposit fell about 25 basis points (a basis point is 1/100th of a percentage point).

"It was a magnificent performance by the market" in the face of the money supply spurt and the Fed's actions, Sullivan said. "But I don't see how the market can hold up until it knows where the federal funds rate is going."