he nation's financial markets exploded to record highs today as analysts predicted the election results would not upset currents trends toward lower inflation and lower interest rates.
The Dow Jones Industrial Average rose more than 43 points for the greatest one-day gain ever and closed at 1,065.49, which topped the 10-year-old record by 14 points.
Investment managers suggested that the election results would put continued pressure on the Federal Reserve Board to maintain policies encouraging lower interest rates. A cut in the discount lending rate -- the interest that banks pay the Federal Reserve for funds -- also appeared imminent, some said.
The Democratic Party's gains on Tuesday reflected a deep concern about the economy that the Fed could not ignore, analysts said. "Now the Fed can get on with the job," said Edward Yardeni, chief economist at Prudential Bache Securities Inc. The greater Democratic Party strength also improves chances for a budget compromise, analysts said.
The industrial average -- a closely watched barometer of large corporate stocks -- was up sharply throughout trading today, but hectic late buying propelled it up by about 20 points in the last hour of trading. Volume of 137 million shares was the fifth-highest in history, up from 104.7 million yesterday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 159.31 million shares.
Today's trading rush revived a stock market that had begun pulling back from August and October surges that had pumped the Dow industrial average up more than 260 points. Last week the market fell nearly 40 points, a show of profit taking and Election Eve jitters.
Although the records today cheered investors across Wall Street and set off a flurry of buying orders at brokerage houses, a number of key market watchers cautioned against viewing the record market performance as a sign of long-term confidence in either administration programs or the ability of Congress to force fiscal compromise.
"The market is in a major advance and it's going to go that way until time for a major appraisal," said Robert Farrell, chief market analyst for Merrill Lynch Pierce Fenner & Smith.
There had been widespread concern on Wall Street that substantial Democratic congressional gains might have jeopardized agreement on federal spending cuts, leading to higher deficits and a rekindling of inflation.
Steven Einhorn, vice chairman of the Investment Policy Committee of Goldman Sachs & Co., said that he views the election results as "insignificant to investors, a blip on the radar screen."
Einhorn and other market analysts noted that the strengthening of the Democratic House majority could lead to "political gridlock" over the budget in the middle of next year, but also said that budget skirmishes were too far away to alter the short-run upbeat economic picture.
Results on the bond market supported the positive short-term view, as long bonds rose by just a point and yields on short-term government bonds fell slightly. But the gains on the stock market came in virtually every sector as 1,518 stocks gained on the New York Stock Exchange and only 251 declined.
The New York composite index closed at 82.05, up 2.93 points, and the average share rose by $1.20.
Standard & Poor's index of 400 industrials rose 6.22 points to 159.60, and S&P's 500-stock composite index was up 5.38 points at 142.87.
The most active stocks on the New York exchange were primarily energy and technology concerns, as trading leader Exxon rose 3/4 to 31 1/8; American Telephone & Telegraph Co. closed at 62 3/4, up 2 1/4; and International Business Machines rose 3 3/8 to 85 1/4.
The gains were just as broad on the American Stock Exchange. The Amex composite index closed up 7.83 points at 336.45 on a volume of 12.2 million shares.The average price per share rose by 31 cents.
The NASDAQ composite index for the over-the-counter market closed at 222.77, up 5.12 points.