The nation's financial markets calmed down today after two days of uncertainty and chaos following the announcement of the Federal Reserve's new tight money policy to fight inflation.

The stock market, which was gripped by the heaviest panic selling in its history Wednesday, closed down again. But the decline was only 4.70 in the Dow Jones industrial average, compared with an 8.27 decline Wednesday and a big 26.45 decline Tuesday.

Similarly, the dollar was steady in trading with European currencies and the price of gold tumbled both in London and in New York.

It was in the nation's money markets where there was the most panice. The Federal Reserve, carrying out its monetary policy, used to buy and sell government securities almost daily to keep interest rates under control.

The Federal Reserve said last Saturday it would intervene in the money markets much less frequently and would be more willing to tolerate wide swings in interest rates.

Without the Fed's constant intervention, the money markets -- where short term securities are traded -- reacted with the confusion of a small child who no longer had a parent as a guide.

"It will take another week or two for the markets to adjust to the lack of Federal Reserve intervention," said Lawrence Kudlow, chief economist at the securities firm Bear, Stearns. But conditions "relaxed substantially" from the anxiety level reached Tuesday and Wednesday.

Most of the nation's banks and money markets were closed Monday because of the Columbus Day holiday.

Many short-term rates that skyrocketed Tuesday and Wednesday fell back today.

The bond market performed erratically, but most issues were again down on the day.

Early yesterday, the stock market looked like it was about to nose-dive. At one point just before noon the Dow average was down more than 12 points. But it began to rally again and closed off only 4.70.

More important, while on Tuesday and Wednesday nearly every stock declined in price, today 877 stocks traded at a higher price while only 702 issues fell.

Volume was 47.7 million shares. That is considered a heavy day by normal standards, but it is far below the 81.6 million shares that changed hand on the New York Exchange Wednesday.

Wednesday's wave of panic selling -- trading volume exceeded the previous record by about 16 million shares -- was triggered not only by skittishness about the economic effect of the new Fed policy -- but also by a host of small investors who had bought stock on credit (using margin accounts at their brokers).

Because interest rates have risen sharply, it costs investors much more to buy stock on credit. Once prices began to decline sharply on Tuesday at the same time that banks boosted interest rates again, many small investors decided it was time to sell.

But today, according to James Baylog, senior executive vice president of Drexel Burnham Lambert, there were many more big investors -- pension funds, insurance companies and the like -- looking for bargain prices after three days of steady declines.

The nation's stock markets, unlike most other financial markets, were open Monday. The Dow average tumbled more than 13 points on Monday.

One analyst said that investors were heartened when news services carried a report that President Carter told a union convention that the U.S. will have to be frugal and that he reaffirmed the administrations's determination to fight rising prices.

The New York Stock Exchange index, which is a broader measure of performance than the Dow average, declined .02 to close at 59.51.

On the American Stock Exchange prices rose. The American index was up 0.59 to 213.24.

Trading in both gold and foreign currencies was light today as investors are still trying to decide whether the new Fed policy will be effective. But the dollar gained ground against most major currencies and gold prices, which rose sharply Wednesday, declined today.

In London, gold was fixed at $401.50 an ounce compared with $413 on Wednesday. In New York, gold closed on the New York Commodity Exchange at $386.80, down $28.90 from its Wednesday close.

Gold investors seemed convinced Wednesday that the U.S. policies would not contain inflation. Today they seemed to have changed their minds.

The dollar closed at 1.78025 West German marks, up from 1.7785 on wednesday. In Zurich, the dollar could buy 1.6112 francs, compared with 1.6085 the day before. The dollar also gained against the British pound, the French franc and the Japanese yen.